Course Outline
Join PRO

Are LIFO inventory amounts ever written-up to their market value?

Author:
Harold Averkamp, CPA, MBA

LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance sheet.

The reason inventory is not increased to its current value is the cost principle, the cost flow assumption, consistency, and other accounting concepts and principles. When a company elects the LIFO cost flow assumption, it chooses to put its most recent costs in the cost of goods sold, and to leave its earlier costs in inventory. The company cannot violate the cost principle by later increasing the inventory to an amount that is greater than those earlier actual costs.

One place that you might find part of the difference between the LIFO cost reported on the balance sheet and its current market value is the “Inventories” footnote to the financial statements. For example, in General Electric’s 2011 Annual Report to the SEC (Form 10-K), it indicates that if General Electric had not been using LIFO (for many years), its balance sheet inventory amount would have been greater by $450 million. That does not mean that the difference between its inventory cost and its market value is $450 million, but I suspect that it is part of the difference.

Join PRO to Track Progress
Must-Watch Video

Advance Your Accounting and Bookkeeping Career

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus