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Accounting methods and managerial discretion: The case of dollar‐value LIFO
Author(s) -
Shaftel Timothy L.
Publication year - 1992
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090130205
Subject(s) - fifo and lifo accounting , liberian dollar , inventory valuation , value (mathematics) , economics , purchasing , accounting , business , operations management , finance , computer science , mathematics , fifo (computing and electronics) , statistics , computer hardware
This paper focuses on inconsistencies in cost‐flow behavior associated with the use of dollarvalue LIFO. These inconsistencies can lead to confusing inventory valuations, potentially misleading accounting reports, incorrect purchasing decisions, and unanticipated tax results. Understanding these effects will enhance the use of dollar‐value LIFO as a management tool and will improve the interpretation of financial accounting information. With dollar‐value LIFO for multiple items, much of the conventional wisdom about LIFO vanishes. The relationships among inventory purchases, inventory liquidations, and gross margin are derived.