New evidence on the incremental information content of earnings reported using the LIFO inventory method

• Published in: Advances in accounting Vol. 28; no. 2; pp. 235 - 242
• Main Authors: Houmes, Robert, Dickins, Denise, O'Keefe, Ruth
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-12-2012
• Subjects: Accounting; Convergence; First-in-first-out; Information quality; Inventories; Last-in-first-out; Profits; Reporting; Shedding; Stockpiling; Last-in-first-out; First-in-first-out; Information quality
• ISSN: 0882-6110; 2590-1699
• DOI: 10.1016/j.adiac.2012.09.005

This study extends prior research by comparing the relative information quality of LIFO earnings and non-LIFO earnings using updated data and methodology. Results suggest LIFO earnings are incrementally informative independent of tax reporting implications. In addition to shedding light on why the results of prior studies present conflicting evidence about the relative information content of LIFO, these findings are important in light of international accounting standards convergence efforts, under which LIFO is currently prohibited.