Firms that use the LIFO inventory method must disclose inventory on a FIFO basis either directly on the balance sheet or in the footnotes. - Dinesh S
True. The LIFO reserve is mandatory disclosure for LIFO firms
Ok, so just to be on the same page. If the company uses LIFO Inventory method, then LIFO reserve MUST be declared (so as the ease the Analyst to interconvert from LIFO to FIFO accounting) If the company uses FIFO Inventory method, then LIFO reserve is NOT needed Does this make sense? - Dinesh S
Sounds good. LIFO reserve only applies to when LIFO is used for inventory accounting. i.e LIFO reserve is what you would add to LIFO inventory to get FIFO inventory. LIFO firms must disclose the lifo reserve (mostly in footnotes, sometimes in the Bal Sheet). FIFO firms do not need to provide any similar disclosures on conversions to LIFO.