LIFOkirjanpitoa

LIFOkirjanpitoa refers to a Finnish term that translates to "LIFO accounting." LIFO, which stands for Last-In, First-Out, is an inventory valuation method. Under this method, it is assumed that the most recently acquired inventory items are the first ones to be sold or used. Consequently, the cost of goods sold is based on the cost of the newest inventory, while the remaining inventory on hand is valued at the cost of the oldest inventory.

The primary impact of LIFO accounting is on a company's financial statements, particularly its cost of goods sold and ending inventory value. During periods of rising prices, LIFO generally results in a higher cost of goods sold compared to other inventory methods like FIFO (First-In, First-Out). This higher cost of goods sold leads to lower reported net income and, consequently, lower income tax liability. Conversely, during periods of falling prices, LIFO would result in a lower cost of goods sold and higher net income.

In Finland, the use of LIFO accounting is not permitted under Finnish Generally Accepted Accounting Principles (FGAAP) for statutory financial reporting. However, Finnish companies may be able to use LIFO for tax purposes if they have been granted specific permission from the Finnish tax authorities. This separation between statutory accounting and tax accounting is a key aspect of how LIFO operates within the Finnish financial landscape. The rationale behind disallowing LIFO in statutory reporting is often related to presenting a more accurate picture of the physical flow of goods and avoiding potential manipulation of reported profits.