2 companies have same operational results. If the company using FIFO switches to LIFO in an inflationary setting, who will report a higher net income?

If they sell the same quantities for the same price (same operational results), they will report the same revenue (income).

The company using LIFO wil have a higher cost of goods sold (due to the inflationary setting) and therefore will report less profitability.

In FIFO,presumption is stock available  the latest arrived. Hence stock is valued at recent (more) price.Hence profit more.The more the price the more the artificial profit in times of inflation.

In LIFO presumption is latest stock sold out.Hence stock available is previous one.Hence, stock is valued at earlier price(less).Hence profit is less.

IFRS prohibits LIFO, Maybe FASB(US) is ok with LIFO.Comparison is possible under one and the same standard only. Suppose, LIFO is allowed. Under the above circumstances, disclosure on change and the quantum is required to bring both companies under the same denominator.

As per this, whether above A company or B company will have to show the same net adjusted result.

IFRS has International Acceptance including Gulf.US also started changing direction towards IFRS.

FIFO will show higher income

If for both companies the sales, material purchase & stock level remains same than company using FIFO method will post better results in inflanatoiry situation

LIFO is no more used as valuing Inventory as per IAS's and IFRS;s

Depends On Material Purchased, Demand And Price..

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very simple FIFO. Bcoz the last inventory purchased at higher price will be selling in last.

FIFO will result in higher profit. The reason why LIFO is banned in IFRS is just because it results in lower profits thus results in lower taxes for inflationary economies

Company may Switch to LIFO