Question

Assume that, at the end of 1999 (1998), Pfizer reported that replacement cost (equivalent to FIFO) for its inventories that are valued using LIFO accounting was $15 ($8) million greater than the LIFO valuation. Ignoring the impacts of any acquisitions and divestitures, how much income "from continuing operations before provision for taxes on income and minority interests" would have been reported by Pfizer if it had used replacement cost accounting (FIFO) during 1999? Show work and discuss the advantages of FIFO over LIFO and vice versa.

Answer 1

We expect that the Pfizer has revealed $100 Million as benefit before charge utilizing LIFO strategy for bookkeeping.

After difference in stock valuation from LIFO to FIFO benefit before expense would be $115 Million. Increment in stock will diminish cost of merchandise sold and consequently benefit will increment to that surviving.

We have expected before announced benefit $100 Million

Include: Reduction in cost of merchandise sold $15 Million

Modified benefit $115 Million

Core advantage of the FIFO over LIFO is that the stock get esteemed shutting to current rate. In LIFO edges are get lower because of utilization of old costs. Under LIFO stock detailed at lower esteem coming about lower revealing of benefit. This defects in stock valuation get amended in FIFO technique for valuation.

Under FIFO stock record is lower when contrasted with LIFO.