tag:blogger.com,1999:blog-6285680995525398922.post5850792160005743628..comments2023-10-25T03:38:18.508-04:00Comments on Amongst the Stars (Deprecated): Understanding LIFO ReserveJoshua Wonghttp://www.blogger.com/profile/00627690311914462248noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6285680995525398922.post-39559167065052853752009-11-21T23:38:53.930-05:002009-11-21T23:38:53.930-05:00Interesting blog and helpful insights...but you sa...Interesting blog and helpful insights...but you say in this post that if you purchase more than you sell, your LR goes up; and if you purchase less than you sell, your LR goes down. But this is not necessarily the case. It all depends on the specs of the inventory units and dollar values. Your example actually demonstrates the problem...in 2010 you are purchasing less than you sell, and in 2011 you are purchasing more than you sell, but the LR increases over both periods ($25 per period). I may be missing something, but wanted to point this out.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6285680995525398922.post-46408939349479057242009-10-01T15:09:48.224-04:002009-10-01T15:09:48.224-04:00New post on Negative LIFO!
http://amgstr.blogspot...New post on Negative LIFO!<br /><br />http://amgstr.blogspot.com/2009/10/negative-lifo-reserve.htmlJoshua Wonghttps://www.blogger.com/profile/00627690311914462248noreply@blogger.comtag:blogger.com,1999:blog-6285680995525398922.post-75702788698561001182009-08-01T12:32:11.422-04:002009-08-01T12:32:11.422-04:00That's an interesting point. Also, I agree wit...That's an interesting point. Also, I agree with you regarding LIFO reserve and cash flow.<br /><br />LIFO reserve is a statement of financial position (a non-moving target) versus *change* in LIFO reserve which is reflected as a change in working capital (which still isn't classed as cash flow, but at least more related).<br /><br />I was looking for examples of real companies I would look at in order to determine if there was such a thing as negative LIFO reserve.<br /><br />I wanted to look for a company which uses LIFO, has very high inflation on it's prices, but also experienced a crash in price recently (in order to get the math to say LIFO reserve is negative). Sound familiar?<br /><br />When I find the right oil company to look at, hopefully I'll have more intelligent comments.Joshua Wonghttps://www.blogger.com/profile/00627690311914462248noreply@blogger.comtag:blogger.com,1999:blog-6285680995525398922.post-46001569274240298312009-07-27T11:40:10.707-04:002009-07-27T11:40:10.707-04:00Great explanation and example! I work with lenders...Great explanation and example! I work with lenders on financial statement and tax return analysis and just got a question about LIFO Reserves. The borrowing company's accountant is saying the lender should 'add it to cashflow' in determining debt-paying ability. I disagreed.<br /><br />I also think there could be negative LIFO Reserves if pricing were falling from the inception of LIFO. But since LIFO is often used for tax advantage, if the inventory method was adopted during dropping prices FIFO would actually give a lower income and defer taxes. <br /><br />So another question would be, would the company pick FIFO for short-term tax advantage? If not, negative LIFO reserves would be shown. Can't wait to see what answer you come up with.Linda Keith CPAhttp://www.lindakeithcpa.comnoreply@blogger.com