Repealing the LIFO Inventory Accounting Choice? A Review of LIFO and Inventory Management

Yibin Zhang¹, Chunming Shi², Patrick Gao³, Feng Wang¹

¹School of Business Administration, Shanghai Lixin University of Commerce, Shanghai, China.
²School of Business and Economics, Wilfrid Laurier University, Waterloo, Canada.
³Ferrero Trading Lux S.A., Diekirch, Luxembourg.

DOI: 10.4236/ajor.2014.46034                

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.

Keywords

Inventory Management, Inventory Accounting, FIFO, LIFO

Conflicts of Interest

The authors declare no conflicts of interest.

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