Page 14 - FINAL CFA I SLIDES JUNE 2019 DAY 8
P. 14
Session Unit 8:
28. Inventories
LOS 28.e: Explain LIFO reserve and LIFO liquidation and their effects on financial statements and
ratios., p.186
LOS 28.f: Convert a company’s reported financial statements from LIFO to FIFO for purposes of
comparison. , p.186
For LIFO AFS = FIFO AFS, CFA must:
tanties
1. add the LIFO reserve to LIFO inventory on the
balance sheet.
2. increase the retained earnings component of
shareholders’ equity by the LIFO reserve.
For LIFO AFS = FIFO AFS, CFA must:
1. Also, decrease LIFO firms cash by tax rate * LIFO
reserve and increase retained earnings by LIFO
reserve (1-tax rate)
