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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: John Carragher who wrote (53668)11/18/2005 8:24:46 AM
From: Ed Ajootian  Read Replies (1) of 206317
 
John C., LIFO inventory accounting is one of the few methods of accounting that the tax rules require conformity with GAAP. So if GAAP changes to FIFO, these companies would have to also change to FIFO for tax it would seem.

It would be most ironic if oil prices were to go down during the year after this law were changed. I'm no inventory accounting guru, and it has been years since I worked in this area, but my vague recollection of this stuff is that FIFO allows you to flush out into your P&L the first oil you purchased for the year, and leave in your ending inventory the last oil you purchased for the year. If the former cost you more than the latter (i.e. oil prices have gone down), your cost of goods sold will be higher under FIFO than LIFO. Higher COGS means lower net (and taxable) income!
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