There are two things i am struggling with understanding. converting Equity and NI.
Since your COGS is higher for LIFO, your net income will be lower, and this also lowers your equity.
Equity (FIFO) = Equity (LIFO) + (LIFO Reserve * (1-Tax rate)
Net Income (FIFO) = Net Income (LIFO) + (Change in Reserve * (1-tax)).
Can someone please explain the 1 - tax rate? i understand that pretty much every company in the US prefers LIFO (during rising inflation periods), because there NI is less and they are taxed less than FIFO.