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- Title
Some Additional Evidence on the LIFO-FIFO Choice Using Replacement Cost Data.
- Authors
DAVIS, HARRY Z.; KAHN, NATHAN
- Abstract
The article discusses the additional evidence on the last-in, first-out (LIFO) and FIFO choice using replacement cost data. According to the author the tax savings to the firm adopting LIFO equals the difference between first-in, first-out cost of goods sold (CGS) and LIFO CGS times the firm's marginal tax rate. The distinction of the CGS difference (DIF) for both LIFO and FIFO firms uses an estimation algorithm that used wholesale price indices and assumed a uniform rate of purchases and exclusive use of LIFO or FIFO. The alternative means of estimating CGS DIF uses replacement cost data reported directly by the firms and footnote disclosures of FIFO inventories reported by LIFO firms. The alternative avoids the need to assume a particular pattern of purchases or choose price indices.
- Subjects
INVENTORY accounting; LAST in, first out (Accounting); FIRST in, first out (Accounting); INDUSTRIAL equipment replacement cost accounting; CURRENT value accounting; COST of sales
- Publication
Journal of Accounting Research (Wiley-Blackwell), 1982, Vol 20, Issue 2, p738
- ISSN
0021-8456
- Publication type
Article
- DOI
10.2307/2490897