what is last in first out lifo 
last in first out lifo is a method used to account for business inventory that records the most recently produced items in a series as the ones that are sold first that is the cost of the most recent products purchased or produced is the first to be expensed as cost of goods sold cogs while the cost of older products which is often lower will be reported as inventory two alternative methods of inventory costing include first in first out fifo in which the oldest inventory items are recorded as sold first and the average cost method which takes the weighted average of all units available for sale during the accounting period and uses that average cost to determine cogs and ending inventory understanding last in first out lifo last in first out lifo is only used in the united states where any of the three inventory costing methods can be used under generally accepted accounting principles gaap the international financial reporting standards ifrs which is used in most countries forbids the use of the lifo method most companies that use lifo inventory valuations need to maintain large inventories such as retailers and auto dealerships the method allows them to take advantage of lower taxable income and higher cash flow when their expenses are rising most u s public companies prefer to use fifo 1 if a company uses a lifo valuation when it files taxes it must also use lifo when it reports financial results to its shareholders which lowers its net income 23lifo inflation and net income