"You can think of a LIFO Liquidation as finally recognising previously unrecognized inventory gains in the income statement. " can anyone explain what does this mean?
Suppose that 20 years ago you started using LIFO, when unventory cost $10/unit. Today, inventory costs $50/unit, and you have 1,000 units in inventory, at $10 each. Your inventory is shown as $10,000, but it’s really worth $50,000 (at current costs): you have unrecognized gains in inventory of $40,000.
If you had a complete LIFO liquidation, your COGS would be $10,000 instead of $50,000, so you would show an additional $40,000 in profit (before taxes): you’ll have recognized (on the income statement) the previously unrecognized inventory gain.
Or something like that.
Wow ,now i understood this line. S2000, are you a God or something ? Thanks once again !!
You flatter me.
I’ve been asked a lot of questions, so I’ve had to develop a lot of explanations. Nothing more.
You’re quite welcome.