Why Would a Company Elect to Use Dollar-Value LIFO Retail

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The Answer is Companies typically choose LIFO versus FIFO or average cost methods) because, in a period of rising prices, LIFO results in lower taxable income and therefore lower income tax liabilities. Companies that have few inventory items may elect to use traditional LIFO. However, record keeping requirements are costly if the company has a large number of inventory items. Furthermore, if the types of inventory items are constantly changing, adding new items and eliminating old items, the tax benefits of LIFO reverse themselves after old items are removed from inventory which erodes older layers of LIFO-based inventories.
The companies that maintain a large number of products and expect significant changes in their product mix in future, frequently use dollar-value LIFO technique. Older LIFO layers of inventory, representing past tax savings, are based on price-level indices. These layers are maintained as long as the overall quantity levels of inventory are maintained regardless of the quantities of individual inventory items

Why Would a Company Elect to Use Dollar-Value LIFO Retail

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