LIFO Reserve

LIFO Reserve is a financial metric used by companies that use the Last-In, First-Out (LIFO) inventory accounting method. It represents the difference between the inventory value reported using LIFO and what it would be if reported using First-In, First-Out (FIFO). Essentially, it shows how much lower or higher the inventory value is under LIFO compared to FIFO due to price changes over time. This reserve helps analysts and investors understand the impact of LIFO on a company’s financial statements, particularly in periods of rising prices, and allows for better comparison with companies using different inventory methods.