Hey guys.
When changing the accounting principle from FIFO to LIFO, US GAAP only requires to do it prospectively. I would love to know (with an example), why it is impractical to do it retrospectively and why it can be done if a company switches from LIFO to FIFO.
Any ideas? Thanks!
No need for an example.
LIFO needs a LIFO Reserve account, whereas FIFO doesn’t. If you’ve been using FIFO and want to switch to LIFO, you don’t have an historical LIFO Reserve account, so it’s difficult to recreate retrospective (LIFO) financial statements. If you’ve been using LIFO and want to switch to FIFO, you do have an historical LIFO Reserve account, so it’s easy to recreate retrospective (FIFO) financial statements.
Aaah, perfect, thank you!
My pleasure.