The LIFO inventory valuation method is a big difference between IFRS and US GAAP that standard setters have left untouched.  I have heard many people question what will become of LIFO if the SEC decides to go forward with some kind of IFRS implementation in the US.  Perhaps this would be the first “carve-in” for US reporting purposes.  But, it’s possible that the question will not be relevant because Congress will make that decision for the SEC.

The Obama administration unveiled a set of proposals yesterday that if enacted, would significantly revise the tax code for businesses.  The proposal receiving the biggest headlines is one that will reduce the maximum tax rate to 28 percent.  But the plan also carries several proposals meant to eliminate advantageous tax treatments, including the elimination of LIFO.

This is not the first time the Obama administration has targeted the elimination of LIFO as a way to increase tax revenues, only to be subsequently shot down in Congress.  But, this is the first time, as far as I’m aware, that the proposal has been couched within a broader framework that includes a reduction in tax rates.  This new packaging might make it more palatable for Congress to pass.  Of course, taking away LIFO as an allowed method for tax purposes would effectively eliminate it as a method used for financial reporting purposes, too.  In addition, it would eliminate another stumbling block for IFRS integration.