<P> The difference between the cost of an inventory calculated under the FIFO and LIFO methods is called the LIFO reserve (in the example above, it is $750). This reserve is essentially the amount by which an entity's taxable income has been deferred by using the LIFO method . </P> <P> In most sets of accounting standards, such as the International Financial Reporting Standards, FIFO (or LIFO) valuation principles are "in - fine" subordinated to the higher principle of lower of cost or market valuation . </P> <P> In the United States, publicly traded entities which use LIFO for taxation purposes must also use LIFO for financial reporting purposes but such companies are also likely to report a LIFO reserve to their shareholders . A number of tax reform proposals have argued for the repeal of LIFO tax provision . The "Save LIFO Coalition" argues in favor of the retention of LIFO . </P>

What is the purpose of lifo and fifo