Presently an accepted inventory method for tax purposes

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Reference no: EM13777043

The LIFO inventory method is presently an accepted inventory method for tax purposes. This method, during inflation, results in a lower ending inventory value than the other inventory methods. Accordingly, this method reduces present taxable income and reduces the overall tax bill. However, LIFO is not allowed under IFRS. If LIFO is not allowed for external reporting purposes and the LIFO conformity rule is not modified, then companies presently using LIFO must change their inventory method. This change can result in increased income taxes. Assume you have a newly incorporated client operating in an inflationary business environment that is contemplating adopting LIFO. What would you advise them? What factors would you consider in that recommendation?

Reference no: EM13777043

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