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CSW Industrials Inflates Profit by $2 Million With Switch to FIFO
Industrial company suggests the change had nothing to do with lifting margins.
During the first quarter of 2022, CSW Industrials (CSWI), an industrial products and specialty chemicals manufacturer, changed the way it accounts for inventory from the LIFO to FIFO method. Changing to FIFO— especially during a period of rising costs— can increase a company’s profitability since older inventory acquired at a lower cost is used to value cost-of-goods-sold (COGS) on the income statement.
For the fiscal year ending March 31, 2022, the change slashed CSW’s cost of sales by $2.7 million and inflated net income $2.14 million, or $0.14 per diluted share.
Not surprisingly, CSW says the change had nothing to do with lifting margins and profits. Instead, the company says the change was prompted, in part, by a desire to improve CSW’s comparability with industry peers that use the FIFO method.
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