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| Author: | Frankel, M. Trezevant, R. |
| Title: | The year-end LIFO inventory purchasing decision: an empirical test |
| Journal: | Accounting Review
1994 : APR, VOL. 69:2, p. 382-398 |
| Index terms: | INVENTORIES PURCHASING ACCOUNTING |
| Language: | eng |
| Abstract: | The present research provides evidence that high-tax LIFO firms are more likely to puchase extra inventory at year-end than low-tax LIFO firms. This behavior is predicted because a LIFO firm's tax savings from purchasing extra inventory at year-end are increasing in its marginal tax rate. Additional evidence of tax-motivated year-end inventory purchases is offered by tests which find that consistently high-tax LIFO firms accelerated their year-end inventory acquisitions - and thus reduced their taxable income - to a significant degree in the years immediately preceding the reduction in tax rates mandated by the Tax Reform Act of 1986. |
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