Page 9 - FINAL CFA I SLIDES JUNE 2019 DAY 8

LOS 28.e: Explain LIFO reserve and LIFO liquidation
and their effects on AFS and ratios., p.186 Session Unit 8:
LOS 28.f: Convert reported AFS from LIFO to FIFO for 28. Inventories
purposes of comparison. , p.186

Lower COGS, Higher CI, Higher NI

Higher COGS, Lower CI, Lower NI
tanties

For LIFO AFS (US GAAP) = FIFO AFS (Balance Sheet) For LIFO AFS = FIFO AFS (Income statement):
1. Add LIFO reserve to LIFO inventory (Dr) 1. Decrease cash (Cr.) by tax rate * LIFO reserve, and
2. Increase retained earnings (Cr.) by LIFO reserve. 2. Decrease retained earnings by tax rate * LIFO reserve