As inflation became a consistent cost driver of carrying & selling inventory in the early-mid 1930’s, a large number of companies and industry trade associations actively sought an inventory method other than the FIFO or weighted-average costing methods in order to match revenues against costs more accurately and to also more clearly reflect income. Inventory & tax accounting experts along with academic scholars worked on the behalf of these companies & trade associations to derive & promote the use of the last-in, first out method.
These experts & scholars researched & studied the LIFO method and became confident that it should be considered an acceptable inventory valuation method for tax purposes, and eventually promoted its use to Congress. The joint effort of accounting experts, scholars, and congressmen led to the LIFO method becoming an acceptable inventory method when the Revenue Act of 1938 was passed. Today, LIFO has now been an acceptable means of inventory valuation for almost 80 years.
The facts and figures below summarize the defining principles of the LIFO method & authoritative references that played pivotal roles in its inception:
LIFO_Inventory_Method_Authoritative_References_Principles