Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: i-node who wrote (228520)	4/10/2005 1:46:13 AM
From: Mani1	Read Replies (2) of 1576379

Re " I'm a CPA, but I haven't the slightest idea what inventory accounting implications are for these companies -- and I'd wager neither you nor the others on this board do, either. I know they're on LIFO, and to the extent they're using that inventory, profit margins are inflated by these crude price increases. LOL, they should take your CPA license away :) First of all, LIFO accounting is not allowed in Europe, where many of the oil companies are located. Only American companies can use it. Second you got it completely backward. LIFO accounting REDUCES net income during inflationary environment. The reason is simple; all recent inventory purchases (at higher price) are moved out first. All old inventories (low price) are kept for lower inventory asset, lower income. Companies (mostly private) like LIFO for this exacts same reason, it reduces reported net income and of course less tax, thus increased cash flow. Sorry, LIFO accounting method has nothing to do with why these companies’s are making record earnings. As far as competitive market taking care of everything, well that is what everyone said during California’s “energy crisis”. It did not turned out to be correct. Mani

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