You want to compare Caterpillars operations for fiscal 2007 to those of an international competitor, CNH Global, headquartered in the Netherlands. (CNH Global financial statements follow the Caterpillar financial statements at the end of the case.) In particular you want to compare a number of inventory-related metrics. However, the two companies do not use the same inventory costing methods: Caterpillar uses LIFO for a large portion of its inventory whereas CNH Global uses FIFO to cost all of its inventory. International financial reporting standards (IFRS) do not permit companies to use the LIFO method. To compare the two companies, you first must restate Caterpillars relevant balance sheet and income statement numbers from LIFO to FIFO. To do this, we assume that Caterpillar had instead always used the FIFO method of inventory costing. Use the table below to aggregate the data you need to covert LIFO to FIFO for Caterpillar. For these calculations, assume that the marginal tax rate for Caterpillar is 35%

Caterpillar, Inc.	2007	2006	2005
Sales	41,962	38,869	34,006
LIFO Cost of gods sold (COGS)	32,626	29,549	26,558
LIFO Net Income	3,541	3,537	2,854
LIFO Inventory from balance sheet	7,204	6,351	5,224
LIFO Reserve from financial statement notes	2,617?	2,403?	2,345?
Total Assets from the balance sheet	56,132	51,449	47,553

Calculations to convert LIFO to FIFO	2007	2006	2005
FIFO Inventory = LIFO Inventory + LIFO Reserve
FIFO Assets = LIFO Assets + LIFO Reserve
Increase in LIFO Reserve during the year
FIFO COGS = LIFO COGS Increase in LIFO Reserve
After-tax effect of LIFO = (1- Marginal tax rate) * Increase in LIFO Reserve
FIFO Net Income = LIFO Net income + After-tax effect of LIFO method

Complete the table below using information from the financial statements and from the table you completed above. Comment on the results comparing CNH Global with Caterpillars As Reported and As if FIFO income statement and balance sheet information.

Year End December 31, 2007	Caterpillar	CNH Global
	As Reported	As if FIFO	As Reported
Common-size Cost of goods sold1
Net Income
Growth in Net Income
Common-size Net Income
Total assets
Inventory
Common-size Inventory2

  

Answer rating: 100% (QA)

Sure Heres the completed table Year End December 31 2007 Caterpillar CNH Global As Reported As if FIFO As Reported Commonsize Cost of goods sold1 32626 30920 29549 27412 34006 26558 24604 Net Income 3... View the full answer