If a company uses LIFO for inventory and leaves a LIFo Reserve of say 10 million. The adjustments to pass i think are: 1) increase inventory by the LIFo reserve; thereby increasing asssets; 2) increase equity by the same amount thereby increaseing shareholders equity. Are there any adjustments to pass to Net Income? CFA Mock Exam says Net Income is increased by the amount.
No you got it right. The only time NI would be affected by LIFO/FIFO is when you are converting a subsidiaries BS & IS into the reporting curency
I’m not sure that’s right. In Mock2 there was a question about FSA synthesis, and it said that if you increase LIFO by LIFO reserve, you have changes to Assets, Equity, and NI (because COGS went down due to LIFO Reserve)
I think it depends on what we want. For NI, you want LIFO COGS For B/S, you want FIFO Inventory If the company does LIFO accounting then the synthesis would be to convert LIFO inventory to FIFO and not change the NI.