Adjusting Equity for LIFO to FIFO

whereas, always, entire

So on some questions when you adjust equity for a LIFO to FIFO normalization you add the LIFO Reserve*(1-T) to equity and LIFO Reserve*(T) to DTL whereas other times you simply add the entire LIFO Reserve to equity.
Anyone know when to which? Or is it assumed to always break it apart if the information is there?

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发表于 2013-4-17 16:36 | 只看该作者

@cpk: can you please elaborate on the second statement you make
“Change in LIFO Reserve * (1-T) is subtracted from COGS to adjust the LIFO COGS. But in our Financial Synthesis world - a LIFO Income statement is “current” so would not require any adjustments. In this case - Change in LIFO Reserve * T would increase NI.”
Particularly the following:
a) To change Lifo COGS to FIFO cogs we subtract change in lifo reserve from LIFO COGS. This adjustment shouldn’t be necessary though because we want COGS stated at LIFO.
b) If we have a LIFO reserve liquidation we need to decrease COGS by the amount of the LIFO reserve (similar to a above but here the change is the size of the entire LIFO reserve), but you seem to be saying that we subtract LIFO Reserve*(1-T). I was under the impression that in this case our NI increase by LIFO Reserve*(1-T) since our EBIT is now higher by the amount of the LIFO Reserve and this gets taxed at T so we are left with NI that is higher by LIFO reserve*(1-T) not LIFO Reserve*T as you suggest.
Any thoughts would be very greatly appreciated as you seem to be the go to guy on this.

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