If a company has a large LIFO reserve and is negotiating a selling price, does that affect the purchase price? And if so how?

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Originally Posted by wjuenger

If a company has a large LIFO reserve and is negotiating a selling price, does that affect the purchase price? and if so how?

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Not sure about your question... to my understanding lifo only means that we are selling the last inventory in so our cost of goods is the actual amount the last shipment cost it does not affect price unless your selling it for a lower amount then it will affect and have to be record as a sale expence or discount depending on the company..

Quote:

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Originally Posted by wjuenger

If a company has a large LIFO reserve and is negotiating a selling price, does that affect the purchase price? and if so how?

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Do you have the answer for this question?

I'm facing the same question with you...

If yes, do tell me... asap... thanks a lot in advanced

Yes the reserve would affect it. This is because the reserve means that the amount of loss you have should you try to liquidate some asets. Review the meaning of why there are reserves for inventory... LIFO would mean you might have some really old inventory that would have to be scrapped