Inventories

COGS = Beginning Inventory + Purcahase - Ending Inventory

Product Costs:

Purchase cost.
Conversion costs.
Allocation of fixed production overhead based on normal capacity levels.
Other costs necessary to bring the inventory to its present location and condition.

Period costs:

Unallocated portion of fixed production overhead.
Abnormal waste of materials, labor, or overhead.
Storage costs (unless required as part of the production process).
Administrative overhead.
Selling costs

存货在U.S. GAAP 和 IFRS 的规定下是不同的。总体来讲是孰低法计价。Under U.S. GAAP, original cost 和 replacement cost 比高低；under IFRS, net realizable value 和 original cost 比高低。GAAP下不能 write-up。

Inventory method:

Specific identification method
FIFO method
LIFO method
Weighted average cost method

FIFO 比较接近更新成本，LIFO则不行。

inventory turnover = COGS / average inventory 越高越好

number of days of inventory = 365 / inventory turnover 越低越好

LIFO results in:

higer COGS
lower taxes
lower net income (EBT and EAT)
lower inventory balance
lower working capital (CA - CL)
higher cash flows (less taxes paid out)

FIFO results in:
lower taxes
higherr taxes
higher net income (EBT and EAT)
higher inventory balance
higher working capital (CA - CL)
lower cash flows (more tax paid out)

Profitability: LIFOLiquidity: LIFO>FIFO
Activity (current ratio): LIFOSolvency (D/A & D/E): LIFO>FIFO

FIFO inventory = LIFO inventory + LIFO reserve
FIFO COGS = LIFO COGS - (ending LIFO reserve - beginning LIFO reserve)

LIFO liquidation (后进先出法清算) occurs when a LIFO firm's inventory quantities are declining. In this situation, the older, lower costs are now included in COGS. The result is higher profit margins and higher income taxes.

*LIFO 最敏感，涨价和降价对他的影响都比FIFO剧烈。