Inflation puts spotlight on companies’ use of last-in, first-out accounting

Concerns about rising inflation and slowing growth are putting the spotlight on an accounting method U.S. companies use to lower their federal tax bill by inflating their costs, which also squeezes their quarterly earnings. Companies including grocery chain Kroger Co. in recent weeks have said their use of last-in, first-out accounting, or LIFO, has increased costs and dented earnings. Kroger said it expects to take a full-year LIFO charge of $300 million this year, compared with a $197 million LIFO charge during the prior year, due to higher inflation. A coalition of industry associations that supports maintaining LIFO said in a letter to Congress this month the accounting method helps companies of all sizes mitigate the effects of inflation.