Topic: Accounting

Inventory at Net Realizable Value

International and U.S. accounting standards require companies to carry inventory on the balance sheet at the lower of cost or market (LCM). With LCM an unrealized loss caused by a change that materially disconnects the in the fair market value of current inventory...

LIFO Liquidation

LIFO Liquidation and a Declining LIFO Reserve A declining LIFO reserve can indicate inventory liquidation or falling prices.  If LIFO reserve declines in a rising price environment, then the analyst might become suspicious that current profit margins are over-stated...

LIFO – Tax and Cash Flow Note

A company’s pre-tax cash flows are not affected by the choice of LIFO versus FIFO. In the US, a tax law known as the “LIFO conformity rule” mandates that if a US company uses LIFO for tax reporting, it must also use LIFO for public financial reporting (i.e. U.S. GAAP...

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