LIFO could stall IFRS_CFO_dec07

LIFO could stall IFRS_CFO_dec07 - How LIFO Could Stall...

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Print this article | Return to Article | Return to How LIFO Could Stall Global Accounting Banned in Europe, the inventory reporting method and its tax treatment have staunch advocates in the United States. David M. Katz , | US December 3, 2007 Will the LIFO method of inventory accounting become a major stumbling block in efforts to get the United States to converge with the rest of the world on a single set of global financial-reporting standards? At present, the matter does seem to be a case of an irresistible force (global convergence) running smack-dab into an immovable object (LIFO). And the barrier to using last-in, first-out inventory reporting under a single international framework is clear: International Financial Reporting Standards bar LIFO. On this side of the Atlantic, the U.S. Internal Revenue Code also insists that companies must use the same system of reporting inventory financials to shareholders and lenders that the companies use to file with the taxman. Thus, a company that uses LIFO now to report income and profit or loss from inventory is not in compliance with IFRS, nor could it continue to report LIFO numbers to the Internal Revenue Service if U.S. regulators start demanding that companies use the international standard rather than U.S. generally accepted accounting principles. Yet for many LIFO users, the tax advantages may be too good to give up without a fight. "I don't want to make an added tax payment as a result of changing to IFRS," says Peggy Smyth, the vice president, controller of United Technologies Corp., which uses the method for part of its accounting for inventory. Unlike first-in, first out (FIFO) accounting, LIFO bases the value of the cost of goods sold on a company's most
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This note was uploaded on 02/22/2012 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.

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LIFO could stall IFRS_CFO_dec07 - How LIFO Could Stall...

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