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Reading 25: Inventories (Required Disclosures (Total carrying value of…

- - - - FIFO (artificially low) < LIFO (reflect current cost)
    - - FIFO > LIFO
    - - FIFO > LIFO
    - - FIFO > LIFO
    - - FIFO (reflect current cost) > LIFO (artificially low)
    - - FIFO > LIFO
    - - FIFO > LIFO
    - - FIFO < LIFO
  - - - FIFO > LIFO
    - - FIFO < LIFO
    - - FIFO < LIFO
    - - FIFO < LIFO
    - - FIFO < LIFO
    - - FIFO < LIFO
    - - FIFO < LIFO
    - - FIFO > LIFO
- - - - FIFO inventory = LIFO inventory + LIFO Reserve
      - FIFO Cash = LIFO cash - (Reserve x Tax rate)
      - FIFO Equity = LIFO equity + [Reserve x (1-Tax rate)]
    - - FIFO CoGS = LIFO CoGS - \(\Delta \)in Reserve
        ( \(\Delta\) is The change in LIFO reserve compared with last year)
      - FIFO Taxes = LIFO Taxes + (\(\Delta \) in Reserve x Tax rate)
      - FIFO Net Income = LIFO Net Income +[ \(\Delta \) in Reserve x(1- Tax rate)]
- - - - Inventory write-up are allowed, but only to the previously recorded level
      - Inventory is valued (at the lower of) cost & Net realizable value
        
        Cost
        
        Excludes
        
        Abnormal amounts
        
        Storage costs
        
        Admin overheads
        
        Selling costs
        
        All costs of bringing the inventory to its current location and condition
        
        Net realizable value = estimated selling price - cost of completion (only for work-in-progress) - selling costs
    - - Inventory is valued at lower of cost or market value
      - Market value = replacement cost.
        only use when: (Net realizable value - normal profit margin) < Replacement cost < Net realizable value
      - No subsequent write up is allowed.
- - - - in inflation, LIFO produces lower profit margin ratios
  - - - in inflation, FIFO produce higher current assets