Benson Company uses the LIFO inventory costing method for both its tax reporting purposes and its financial reporting purposes. Benson's inventories are reported at $502 million on its balance sheet. In its footnotes, Benson Company is required to report the amount at which inventories would have been reported under FIFO method.
The difference between these two numbers is commonly referred to as what?
A) LCM disclosures
B) LIFO holding gain
C) LIFO liquidation
D) LIFO reserve

Question

Quizplus · Accepted Answer

The difference between the inventory reported under LIFO and the amount it would have been reported under FIFO is known as the LIFO reserve. This adjustment is necessary for financial analysis, especially when comparing companies that use different inventory accounting methods.

Benson Company Uses the LIFO Inventory Costing Method for Both