WHY DOES REPORTING INCOME UNDER “GAAP” REWARD BUILDING INVENTORY & PENALIZE REDUCING INVENTORY?

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Jo April 16, 2010 at 7:32 pm

I presume u’re talking about US GAAP. Using LIFO accounting for inventory, a company generally reports lower net income and lower book value. This generally results in lower taxation. Due to LIFO’s potential to skew inventory value, UK GAAP and IAS have effectively banned LIFO inventory accounting.

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