The Question of LIFO or FIFO; Which is Preferable?
Discusses the advantages and disadvantages of alternative inventory flow assumptions allowed in the United States. A single exhibit shows that in Year 2, a company using LIFO in Year 1 could report higher net income by switching to FIFO at a cost of higher income taxes. Retaining LIFO would save taxes but lead to lower reported income. A rewritten version of an earlier note.