Last In, First Out

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Last in, first out (LIFO)

An accounting method that fixes the cost of goods sold to the most recent purchases. Hence, if prices are generally rising, LIFO will lead to lower accounting profitability.

Last In, First Out

In accounting, a technique for valuing inventory by treating inventory acquired most recently as if it were sold first. The sale of inventory is recorded against the purchase price of the most recently acquired inventory, even if the physical goods are not the same. In times of high inflation, the last-in, first out technique reduces a business' inflation risk. It also may reduce one's tax liability. For these reasons, most American firms have used this technique in their accounting since the 1970s.

Last In, First Out (LIFO)

An accounting method for valuing inventories for tax purposes. Under this method, the last items purchased are treated as being the first items sold. Ending inventory is valued using the cost of the items with the earlier purchase dates.
References in periodicals archive ?
The LIFO accounting method for inventories was first permitted in the Revenue Act of 1938 and was quickly extended to all taxpayers in the Internal Revenue Code of 1939.
However, after excluding both fuel sales and the effect of the LIFO accounting change described above, gross margin was essentially flat year-to-year.
Many firms that experienced significant inventory inflation during the 40 years following World War II failed to adopt LIFO accounting.
Further, simplified LIFO also simplifies the LIFO accounting process and allows a company to control its inventory costs better than its competitors.
LIFO accounting requires the company to recognize the higher raw material prices immediately.
In addition, the Company expects its reported earnings per share for the first quarter of 2010 to increase as a result of the lower average cost of raw materials, primarily metals, under the average cost accounting method as compared to the value that would be used for the first quarter under the Company's historical LIFO accounting method.
The theory goes that LIFO accounting can lead to old inventory hanging on the balance sheet.
tax law requires LIFO accounting for financial reporting purposes, if LIFO is elected for tax purposes.
There's good news for companies seeking practical and cost-effective ways to deal with the difficulties of Lifo accounting.
The "problem" occasioned by MSF's impermissible LIFO accounting existed only in those years in which a LIFO increment was created.
Our employees responded to a very aggressive challenge issued at the beginning of the year to reach a goal of $96 million in pretax earnings before the effects of LIFO accounting.
In addition, the cash tax deferral benefits of the LIFO accounting method largely have been eliminated by the year-over-year lower resin prices in 2009.