Why No LIFO?
Response to the following problem:
The LIFO method of accounting for inventory is primarily a U.S. invention. Many countries around the world will not allow LIFO to be used, and other countries discourage its use. For example, the International Accounting Standards Board calls LIFO an undesirable but "allowable" method. In the United Kingdom, LIFO is allowable under corporate law but is unacceptable under professional accounting standards.
Why do you think other countries have such an unfavorable opinion of LIFO?
Think about these issues: In periods of rising prices, does the amount shown on the balance sheet relating to inventory reflect current cost?
If a company's inventory on the balance sheet reflected costs from years past, what would happen to the income statement if those inventory costs were suddenly moved to Cost of Goods Sold?
Would the result reflect a firm's actual performance?