The U.S.tax code requires:
A)Periodic FIFO be used for tax reporting.
B)Periodic LIFO be used for tax reporting.
C)If a company uses FIFO for tax reporting,it must also be used for financial reporting - called the FIFO conformity rule.
D)If a company uses LIFO for tax reporting,it must also be used for financial reporting - called the LIFO conformity rule.
E)Weighted average be used for tax reporting.

Question

Quizplus · Accepted Answer

The correct statement is "If a company uses LIFO for tax reporting, it must also be used for financial reporting - called the LIFO conformity rule." This is because the tax code requires consistency in the inventory valuation method used for tax reporting and financial reporting. While companies have the option to use different inventory methods for tax and financial reporting purposes, if LIFO is used for tax purposes it must also be used for financial reporting.

The U.S.tax Code Requires