Hi there, Changing vom LIFO to FIFO makes in necessary to adjust prior statements. But what about FIFO to LIFO? When Prices are declining we could have the same effects for balance sheet / income statement. I`m not sure whether the conditions on Schweser Page 26 is only for example.
Somebody correcr me if I’m wrong but I believe the reason why they would re-state is because changing the inventory method would cause a change in their financials, regardless of whether or not it was LIFO to FIFO or FIFO to LIFO. I think they used LIFO to FIFO as an example because most companies use LIFO to begin with.
not sure if any one would change from FIFO to LIFO. In any case, if they did, I believe it is again a change in accounting principle, so prior periods must be adjusted. And then the company would also have to make estimates for the LIFO Reserve to fill up in the disclosures section. Other aspect to think about, which might cause a FIFO to LIFO change, less probable is --> a Balance sheet in FIFO is “more predictive” of current conditions, with respect to EI. So why would some one want to go back to LIFO, which is much less predictive of economic reality? CP