Piezo - LIFO liquidation?

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blackscholesvol

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This is for the Piezo example in the topic test:
“On a comparable basis to the European firms in the industry, using Notes 5 and 7, Piezo’s 2013 return on assets ratio, based on end of year assets, is closest to”
Why isn’t LIFO liquidation taken into account? It lowers the COGs so when converting back to FIFO, shouldn’t it increase COG?? The solution just adjusts for the LIFO reserve
 
If you see the solution The cogs have been lowered by the change in lifo reserve net of taxes.Why will it increase cogs?if the question assumes to be an inflationary environment lifo increases cogs but fifo consists of old inventory purchased at lower rates so cogs has to be lower, so when converting to fifo we need to add back the change in lifo reserve to reflect true cogs.
 
I just ran into this problem earlier and I believe the confusion is in whether the Income Statement is post-adjusted or pre-adjusted for Lifo Liquidation under COGS. The answer mentioned:
“But this arose in part because of the LIFO liquidation, which decreased cost of goods sold by 263 (Exhibit 2, Note 5)”.
I think this indicates that we are not adjusting lifo liquidation into COGS, but rather, we are reversing its effect since the income statement shown to us is using COGS post-adjusted for LIFO liquidation. This means, we need to remove the effect of the decrease of COGS from lifo liquidation by adding it back in. THis will cause gross profit to decrease with the pre-adjusted COGS.
Therefore, since the lifo liquidation lowered COGS in 2013, we will reverse it by including the the lifo liquidation adjustment. This way, we can compare 2012 and 2013 without LIFO liquidation.
 
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