Ethics Writing
Sharon Black
Kaplan University

Abstract
Many businesses that have had a good year very often pay some of their bills ahead, ie utilities, rent, etc that would have been paid in the new year but have the bills on hand and increasing the inventory will adjust the cost of goods of the current year which could result in a change in the taxable income for the current year. If you maintain an inventory you do not expense it as you purchase it, buying ahead would only affect your inventory on hand and your cost of goods.

The LIFO accounting method for a business’s inventory (standing for last in, first out) has come under fire from Congress and the White House Sometime in 2012 President Obama recommended repealing this accounting method, saying it was a way for businesses to qualify for significant tax breaks during inflationary times, cutting down on the amount of money and that they then pay to the federal government. The government prefers hat businesses instead follow the inventory accounting method of first in, first out, or FIFO. Upon reviewing the provided information given, he has instructed them to make a large purchase of inventory for delivery 3 days before the end of the year. They are doing that to lower the income, which I don’t think this is ethical. I don’t think that R.J. would have given the same directive if they would have been using the FIFO method. The US Treasury Department, is calling for a repeal of LIFO, says that the accounting method allow businesses to hide the amount of profits that they have truly made in a year by artificially inflating the value of their inventory items. This is why International Financial Reporting Standards bans companies from using the LIFO. I don’t feel like the accountant should order the inventory to lower the income due to the fact that is the only reason why they would order it.
The U.S federal income tax law requires companies that use LIFO for federal income tax purposes to also use this accounting method for their financial statements, something known as the LIFO conformity requirement. LIFO, though, is not allowed under International Financial Reporting Standards. As a January 2012 column by certified public accountant Michael Redemske published in on the American Institute of CPAs' website says, this has convinced many large companies that they may lose the ability to use LIFO unless the IRS is willing to create an exception to the International Financial Reporting Standards or Congress is willing to repeal the LIFO conformity requirement. This, then, may mean that the ethics debate over LIFO accounting will eventually become moot. http://smallbusiness.chron.com/lifo-ethics-50749.html
The income effect – inventory and cost of goods sold are interdependent. As a result, if LIFO method is used in a rising-price and increasing-inventory environment, more of the higher-cost goods (las ones in) will be accounted for in Cost of Goods Sold as opposed to FIFO. Under this scenario, net income will be lower compared to a company that used FIFO accounting. Cash flow effect, if we lived in a tax-free world, there would be no cash flow difference between inventory-accounting methods. Unfortunately, we do pay taxes and alot of taxes.

http://smallbusiness.chron.com/lifo-ethics-50749.html