Abstract
Researchers in the disciplines of both Operations and Accounting have studied Inventory Management, though in relative isolation. In this paper, one of our goals is to help inform researchers in Operations Management about an extensively debated question in inventory accounting: whether to repeal the LIFO (Last-In-First-Out) inventory accounting choice? This question has received extensive scrutiny from various stakeholders including academics, businesses, and different levels of governmental agencies such as US Congress. Specifically, we provide a literature review on how LIFO affects and is affected by inventory management. This is done by first reviewing the potential determinants of LIFO inventory accounting choice and then reviewing potential interactions between LIFO and inventory management. It is our hope that this review will help stakeholders have a more comprehensive understanding of LIFO before making their decisions.
Highlights
There have been two major inventory accounting systems in the world: FIFO and LIFO, standing for First-InFirst-Out and Last-In-First-Out, respectively
The questions need to be answered are: should LIFO be abandoned after its use for 70 years and which potential determinants could decide the attitudes of the industry? First, some basic concepts of inventory accounting systems are to be clarified
It was found that even though the tax saving benefit is obvious, companies remain reluctant to adopt LIFO inventory accounting choice implying that the potential non-tax reasons may force managers to balance the tax benefit with the cost incurred from shifting to the LIFO from the FIFO accounting choice
Summary
There have been two major inventory accounting systems in the world: FIFO and LIFO, standing for First-InFirst-Out and Last-In-First-Out, respectively. (2014) Repealing the LIFO Inventory Accounting Choice? FIFO and LIFO in Operations Management imply something physical and in Accounting imply something financial. LIFO and FIFO are the frequently used inventory valuation accounting systems. The first part of this literature review summarizes the potential determinants behind LIFO inventory accounting choice and analyzes the significance of these variables on LIFO choice in univariate and multivariate analysis. The main purpose of this literature review is to provide a more comprehensive perspective regarding LIFO choice to the researchers from operational area. As no paper about the LIFO choice with a focus on LIFO determinants and interaction with inventory management has ever been published, this literature review is intended to fill the gap and make a contribution to this area. It was found that even though the tax saving benefit is obvious, companies remain reluctant to adopt LIFO inventory accounting choice implying that the potential non-tax reasons may force managers to balance the tax benefit with the cost incurred from shifting to the LIFO from the FIFO accounting choice
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
