The Effects Of LIFO (Last In, First Out) Repeal On The Entertainment Industry

Abstract

The Last in, First Out Method (LIFO) is presently under severe scrutiny from the financial community, which may soon culminate in its repeal as an acceptable accounting method. There are pressures from the SEC in conjunction with the International Financial Accounting Standards Board (IFRS) to standardize accounting practices worldwide. In addition, there is political pressure imposed by the US Obama administration to raise additional revenues. Both groups strongly oppose LIFO, raising a strong possibility that its complete elimination as an accounting method will occur by as early as 2014. This paper addresses the effects of LIFO repeal on the entertainment industry. The result will probably be the elimination of the Lower of Cost or Market Method, which is presently adapted by many non-LIFO firms, and also represents a major tax loophole for those who use it, including the entertainment industry.