LIFO reserve and FIFO

CFA Level II
#1

is FIFO=LIFO+net change of LIFO reserve? what is the formula? under which condition there will be a inventory liquidition, and a LIFO or fifo will be use? Thanks.

#2

FIFO = LIFO + LIFO reserve COGS (FIFO) = COGS(LIFO) - change in LIFO reserve About inventory liquidation have no idea…

#3

inventory liquidation typically makes sense only if company is in LIFO mode. And an analyst must be particularly careful if he is in a rising price environment. In this mode – your older lower priced inventory would go into COGS --> which would artificially inflate your earnings (NI). CP

#4

Inventory liquidation occurs when you are using LIFO and have a declining inventory balance. This will cause you to ‘tap into’ your old inventory that is sitting on the books at their original value causing you to severely reduce COGS. I hope this helps.

#5

Is this right? FIFO CGS= LIFO CGS- change in LIFO reserve LIFO CGS=FIFO CGS + beginning inventory * company inflation? Also, I know the ratio effects of LIFO liquidation, but are there any kinds of calculations involved there?

#6

I think that is Beg FIFO inv in the second formula and company inflation can be calculated as change in LIFO reserve divided by beg FIFO inv of a comparable company. Don’t have notes in front of me. Could someone confirm pls. -Amit

#7

I only know it the way Bradleyz did it. Can we discuss LIFO liquidation while we are on the topic. How does the formula go?

#8

I remember if there is a LIFO liquidation, then analyst need to do sth. is it change to FIFO? I forgot, anybody remember? Thanks. AFJunkie Wrote: ------------------------------------------------------- > I only know it the way Bradleyz did it. > > Can we discuss LIFO liquidation while we are on > the topic. How does the formula go?

#9

what LOS are we talking about, here?

#10

in CFAI mock 5, q19, why use LIFO and have FIFO reserve will lead to an inventory higher? dose it imply a price drop invironment? if not, why I am missing? Thanks. SerGrey Wrote: ------------------------------------------------------- > FIFO = LIFO + LIFO reserve > > COGS (FIFO) = COGS(LIFO) - change in LIFO reserve > > About inventory liquidation have no idea…