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Oshkosh Inflates Op Income With FIFO Switch
Specialty vehicle uses an accounting change to lift prior year profit $47.4 million.
February 22, 2023
In October 2022, Oshkosh (OSK), a manufacturer of specialty vehicles and vehicle bodies, 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.
In its latest annual report, the company recast 2021 and 2020 financials to reflect the switch, which had the following impact:
—2021 Operating income increased by $47.4 million, or 8.7%
—2020 Operating income decreased by $3.9 million, or 0.79%
Oshkosh 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 its comparability with industry peers that use the FIFO method.
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