Regal Rexnord (RRX), a manufacturer of industrial powertrain, transmission, and electric motor components, 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 financials for the years ended January 31, 2022 and 2021 2021 to reflect the switch, which had the following impact:

—2022 Net income increased by $19.7 million, or 9.38%
—2021 Net income decreased by $1.6 million, or 0.84%

Regal Rexnord 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 and to alleviate the administrative burden of determining the LIFO valuation.