Analysis of the Lifo Inventory Valuation Method

University of Connecticut

DigitalCommons@UConn
Honors Scholar Theses Honors Scholar Program

5-10-2009

Analysis of the LIFO inventory valuation method during the onset of IFRS
Joseph Louis Romeo
University of Connecticut - Storrs, [e-mail]

Recommended Citation
Romeo, Joseph Louis, "Analysis of the LIFO inventory valuation method during the onset of IFRS" (2009). Honors Scholar Theses. Paper 79. http://digitalcommons.uconn.edu/srhonors_theses/79

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An Analysis of LIFO inventory valuation

Joseph L. Romeo

Honors Accounting Thesis

December 5, 2008

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Table of Contents I. II. III. IV. V. VI. VII. VIII. IX. X. Introduction…………………………………………….3 The History of Inventory Accounting…………………4 A Closer Look at Inventory Valuation Methods……..7 The LIFO Debate-Proponents………………………....9 The LIFO Debate-Opponents………………………….10 LIFO and the Effect on Financial Ratios……………..16 LIFO Usage over the Past 10 Years…………………...18 Future of LIFO………………………………………....23 Effects of Repeal………………………………………..24 Conclusion……………………………………………....26

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An Analysis of LIFO inventory valuation Introduction Inventory accounting is one of the topics to be discussed as the U.S. contemplates adopting International Financial Reporting Standards (IFRS). The U.S. operates in a global economy; a main goal of IFRS is to enhance investor comparability of firms by adopting one set of accounting standards. The Securities and Exchange Commission (SEC) has recently released a statement justifying the adoption of IFRS and provided a timetable for this action. According to the news release, large, multinational institutions are allowed to switch to IFRS as early as December 2009; however,

Cited: Ayres, Frances L., et al.. A Glimpse at a World without LIFO. N.p.: n.p., n.d. Edward D. Kleinbard, George A. Plesko, and Corey M. Goodman, "Is It Time to Liquidate LIFO?" Tax Notes, Oct. 16, 2006, p. 237, Doc 200620617, 2006 TNT 20029 Kansas Structural Steel Company v. Lucas. U.S. Supreme Court. 14 Apr. 1930. 2008 FindLaw. 5 Nov. . Katz, David M. "How LIFO Could Stall Global Accounting." CFO 3 Dec. 2007. 4 Nov. 2008 . Dennis-Escoffier, Shirley. "IRS Issues Guidance on Changes in Accounting Methods." Journal of Corporate Accounting & Finance. Vol. 9. Wiley Periodicals, Inc., 2006. 105-112. Wiley InterScience®. June 2008. 3 Dec. 2008 . Kewalramani, Sunil. " Convergence of Ifrs, US Gaap and Indian Gaap and Its Impact on Indian Companies Listing in U.s and American Companies Listing in India." Concept Paper, 2 Nov. 2008. Convergence with IFRSs in India. 21 Nov. 2008 . Lessard, Stephen Charles,Giving Life to LIFO: Adoption of the LIFO Method of Inventory Valuation by the Income Tax Code. Tax Lawyer, Vol. 60, No. 3, 2007 Available at SSRN: http://ssrn.com/abstract=1048521 McIntyre, Bob. "Congressman Rangel’s Tax Bill Would Make the Tax Code Simpler & Fairer — and the Changes Are All Paid For." Citizens for Tax Justice 2 Nov. 2007. 21 Nov. 2008 < www.ctj.org/pdf/rangelbill.pdf >. Miller, Paul B W, and Paul R Bahnson. "Fortress LIFO is crumbling: It 's about time." Accounting Today. New York: Jan 28-Feb 10, 2008. Vol. 22, Iss. 2; pg. 13, 2 pgs. 11 Oct. 2008 < http://www.webcpa.com/article.cfm?articleid=26594>. Plesko, George. Committee on Finance, United States Senate. 13 June 2006. 21 Nov. 2008 . Plesko, George, “Does LIFO have a future?” Presentation at the University of Illinois Tax Symposium, October 2008. 27 Viard, Alan D. "Why LIFO Repeal Is Not the Way to Go." Tax Analysts 6 Nov. 2006. 5 Nov. 2008 . “Why repeal LIFO”. 28