The term LIFO reserve refers to

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The LIFO reserve represents the difference between the ending inventory amount calculated using LIFO and the ending inventory amount calculated using another inventory cost flow assumption, typically FIFO. This reserve is created because LIFO assumes that the most recently purchased items are sold first, and therefore, the inventory on hand consists primarily of older, lower-priced items. As a result, the LIFO reserve is a measure of the potential increase in cost of goods sold and decrease in net income that may occur if a company were to switch from LIFO to another inventory cost flow assumption.

The Term LIFO Reserve Refers to