Financial Reporting and Analysis

b) LIFO reserve account records LIFO reserve which is the difference between the values of inventory accounting cost calculated using FIFO method and the one that is calculated using LIFO method. The LIFO reserve calculation in inflationary environment where the value of FIFO is higher than the value of LIFO inventory is LIFO Reservevaluation by FIFO valuation by LIFO. In a deflationary environment, LIFO Reserve has a possibility of having a negative balance caused by LIFO inventory valuation being higher than its FIFO valuation. LIFO reserve indicates the value which a business entity taxable income as a result of using LIFO method has subsequently been deferred. The balance on LIFO reserve account in 2008 is 524.4c) If LIFO reserve account was added to the inventory at LIFO, the