President’s FY 2013 Budget Would Repeal LIFO Accounting, Conforming to IFRS

President Obama’s proposed FY 2013 Budget would repeal the last-in, first-out (LIFO) inventory accounting method under which it is assumed that the last items entered into the inventory are the first items sold. Unlike U.S. GAAP, IFRS reporting standards do not treat LIFO as a permitted method of accounting. The SEC has indicated its support for global accounting standards and it continues to work toward making a determination as to whether, when, and how to further incorporate IFRS into the U.S. financial reporting system. The Joint Senate-House Committee on Taxation has noted that the potential shift from GAAP to IFRS raises the issue of whether companies will be able to continue using LIFO for tax purposes in light of the conformity requirement.