Lifo liquidation treatment someone, please

malbec

Can someone please tell me what is the analytical adjustment for LIFO liquidation and why. I still didn't get it

wilslm

Bcos of LIFO Liquidation - older, lower priced Inventory flow thro' COGS.
As a result of that - your net income is boosted due to "lower COGS" when compared to normal LIFO Inventory.

So your net income is inflated.

However, I am not sure if this is discussed anywhere in the CFAI Books. [If it is and I am mistaken, please point me to the source].

CP

tarunajwani

yes it is true.

but how do we adjust the net income or COGS then?

madaochenggong

isnt it dat we convert the lifo cogs ino fifo cogs or vice versa to compare...wat else are we suppose to do....

hassan

I could not find it in the index. However, I know the analyst "removes" the LIFO liquidation in order to normalize NI, but I'm not familiar what he's supposed to add back.

It seems to me that COGS should obviously go up, NI should go down, and taxes increase. Buuuuut, I don't know by how much. If given previous data with normal COGS, I'd look at taking an average or the prior-period COGS and go with that...