Walgreens booked a pretax LIFO
credit of $8 million versus a $132 million charge a year ago.
Some taxpayers consider changing from the LIFO
method before or after an S election, believing that the effort to maintain the LIFO
calculation is not worth the benefit after the LIFO
recapture amount is recognized as income.
taxpayer had violated the LIFO
conformity rule by providing a bank with financial statements prepared under both U.
Unlike with GAAP, LIFO
isn't an acceptable method of inventory valuation.
GAAP provides that a change in a firm's inventory method is generally applied retrospectively to the prior financial statements presented in the current year's annual report (Accounting Standards Codification [ASC] section 250: Accounting Changes and Error Corrections) Assuming that the new inventory method increases the book value of inventory relative to LIFO
(as is generally the case), a company will increase the book value of inventory, increase retained earnings to reflect an increase in net income, and increase income tax liability (current and deferred) due to the increase in taxable income.
Although a brief summary of LIFO
and FIFO is presented in the case, a more thorough review may be necessary.
One important aspect of this change is the elimination of the use of the LIFO
method because the IFRS simply does not allow it.
To me, it seems the solution to both concerns for LIFO
routing would be to set a threshold that monitors wait times and moves calls up in priority after they had waited for X minutes.
For this reason, it is likely that Congress would repeal the LIFO
method prior to any effective date for conversion to IFRS, so that it can "score" the revenue gains from the resulting Sec.
The prediction that a company will use LIFO
if it has high inventory level is incorrect.
However, should the issue resurface this year, with any kind of support, it could present retailers using LIFO
with an unpleasant tax bill.
As a result, in a period of rising prices, the LIFO
method tempers the distortive effect of inflation on the taxpayer's reported profits.