plz confirm. COGS lifo and Inventory lifo change, reserve, correct, question

towardsutopia21

Am I correct to say that if you know that COGS fifo = COGS lifo - change in lifo reserve, then can you switch it around and say that COGS lifo = COGS fifo + change in lifo reserve? Also, same question w/ Inventory. Since EI fifo = EI lifo + lifo Reserve, does EI lifo = EI fifo - lifo Reserve?

Just wanna make sure b/c CFA likes to switch stuff like that around on you, and it can throw you off big time....

sgupta0827

Maybe, although I want to say no because it seems like I remember reading somewhere that going from FIFO to LIFO isn't as easy and straight forward as that. Plus, if you use FIFO you wouldn't report a LIFO reserve, so it's not a calculation that you would make that easily from the statements.



Edited 1 time(s). Last edit at Friday, June 5, 2009 at 06:47PM by DTM86.

suyash1989

Don't see why not,



Edited 1 time(s). Last edit at Friday, June 5, 2009 at 06:52PM by tfc.

amqata

Algebraically (if that's even a word) it makes sense. Keep the feedback coming. The only reason I ask is b/c it's little crap like this that can really f*$% you up when you think you know something, and then basically you realize all you need to do is switch it around like that. And undoubtly, the answer you thought for sure was correct will be there...

kasinkei

Algebraically the numbers work, but think about it in terms of what is reported and how/why you would do the calculation.

If your goal is to make companies with different reporting methods comparable and you want to convert a FIFO firm's statements to the equivalent LIFO you would need additional information that I don't think is presented in their statements. A FIFO firm would not report what their COGS/Inv Balance would have been under LIFO or a LIFO reserve. Therefore, it does not make sense to test the theory/application in this manner because it would not be used.

ftwcfa

Here's how you convert from COGS FIFO to COGS LIFO. I wouldn't waste time with it.

COGSL = COGSF + (BIF x Inflation Rate)



Edited 1 time(s). Last edit at Friday, June 5, 2009 at 07:03PM by Chuckrox8.

JGovender

No it's the Level 1 Schweser notes. I haven't seen a question on it ever. Don't worry about it guys.