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Cash flow impacts on FIFO vs LIFO

I ran into a mock question that asked about if changing from FIFO to LIFO, how it impacts cash flow.

The answer said no impacts on cash flow. However, I though the tax expense would change which would impact cash flow?

Indirect method: It is because the impact is neutralized by the Lower Net income (decreases CFO) and the lower changes in inventory (increases CFO). 

Best of luck tomorrow

No pre-tax change in cash flow; after-tax cash flow will likely change.

Simplify the complicated side; don't complify the simplicated side.

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S2000magician wrote:

No pre-tax change in cash flow; after-tax cash flow will likely change.

After tax cash flow is higher under LIFO (and hence the preponderance of LIFO in the US - where it is still allowed).

Be true

CMLSML wrote:
S2000magician wrote:
No pre-tax change in cash flow; after-tax cash flow will likely change.

After tax cash flow is higher under LIFO (and hence the preponderance of LIFO in the US - where it is still allowed).

Only if costs are rising.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/