Chapter 08 - Inventories: Measurement
Real World Case 8-8
In 1981, the LIFO conformity rule was liberalized to permit LIFO users to
present designated supplemental disclosures.
These disclosures allow a company
using LIFO to report, in a note, the difference between inventories valued using LIFO
and inventory valued as if another method had been used.
Kroger's note provides this
($ in millions)
Inventory as stated
Add: Increase in LIFO inventory
FIFO inventory balances
Cost of goods sold for the fiscal year ended January 31, 2009 would have been
$196 million lower
had Kroger used FIFO for its entire inventory.
inventory would have been $604 million higher, ending inventory also would have
been higher by $800 million.
An increase in beginning inventory causes an increase
in cost of goods sold, but an increase in ending inventory causes a decrease in cost of
Purchases for the year are the same regardless of the inventory valuation