Question: Some investment professionals refer to LIFO inventory valuation as an earnings management tool, suggesting that LIFO allows a company to create a hidden earnings reserve

Some investment professionals refer to LIFO inventory valuation as an “earnings management” tool, suggesting that LIFO allows a company to create a hidden earnings reserve on a company’s balance sheet, to be used in later periods to help meet Wall Street earnings expectations. Discuss why this assertion might be true and how to measure the size of a company’s “hidden LIFO earnings reserve.”

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Financial Accounting For Executives And MBAs 4th Edition by Wallace, Simko, Ferris