Back to Basics — Inventory method differences

Description

Abstract: Inventory is one of a lender’s biggest sources of collateral. But there are significant differences in the ways borrowers report inventory. This article reviews the differences between two common inventory reporting methods: first-in, first-out (FIFO) and last-in, first-out (LIFO). Over time the choice becomes material, especially in an inflationary environment. If two customers use different inventory accounting methods, they might ultimately have the same bottom line but not both deserve the same credit line.