presents two models to prove that the tax saving is much larger at the year of shifting to LIFO than at other
years and meanwhile, the tax saving uncertainty is strongly correlated with the managerial intention to shift.
The core idea of [6] is to analyze the possible effects caused by the time shifting option and the tax saving uncertainty on the inventory accounting choice. Tax saving is calculated as the product of cost of goods difference
between LIFO and FIFO with the marginal corporate tax rate. [6] takes six majors steps in the process to calculate
the final tax savings. The first four steps divided the overall cost of the goods sold into labor cost, raw material
cost and the overall overhead costs. The fifth step tries to analyze the price changing effects of labor cost
and raw material cost. The final step finally combines all the mentioned cost factors into integrity of the cost of
goods sold. A nonparametric Wilcoxon test was used to compare the tax savings of the switch year and nonswitching
year. Three out of the four data groups are highly significant implying that current tax saving is
strongly related to the LIFO/FIFO cost-of-goods-sold difference.