This document compares the FIFO and LIFO inventory costing methods. FIFO assumes the oldest inventory units are sold first, reducing the cost of goods sold and increasing reported profits compared to LIFO. LIFO assumes newest inventory is sold first, increasing the cost of goods sold and decreasing reported profits. While LIFO reduces near-term taxes in inflationary periods, it is not allowed under IFRS standards and requires tracking more inventory layers. The document concludes that while LIFO defers taxes, FIFO is generally recommended due to broader international acceptance and simpler record-keeping requirements.

1. FIFO VS LIFO

2. Submitted by
• Nazmul Hasan
• 16101047
• Financial Accounting (ACT 211)
• 11th
march, 2017

3. Submitted to
•Nazmul Hasan, Associate professor
•School of business studies
•University of Information Technology & sciences

4. FIFO & LIFO
• FIFO: First in, First out
Goods added to inventory first are
assumed to be sold first
• LIFO: Last in, First out
Goods added to inventory last are
assumed to be sold first

5. FIFO in case of Inflation
• Cost of last added inventory increases.
• Cost of first added inventory are least
expensive.
• Reduces cost of goods sold(COGS).
• Reports more profit.
• Increases tax in the near financial term.

6. LIFO in case of inflation
• Cost of last added inventory increases.
• Cost of last added inventory is most
expensive
• Increases cost of goods sold(COGS)
• Reports less profit
• Decreases tax in the near financial term

7. FIFO is allowed by both GAAP
and IFRS

8. LIFO is not allowed by IFRS
and only allowed by IRS

9. FIFO in case of record keeping
• Fewer inventory layers to track
• Oldest layers are continually used up
which reduces record keeping

10. LIFO in case of record keeping
• More inventory layers to track.
• Oldest layers can remain in the system for
years which increases record keeping.

11. Conclusion
In general LIFO accounting is not recommended for the
following reasons
• It is not allowed under IFRS, and a large part of the
world uses the IFRS framework.
• The number of layers to track can be substantially larger
than would be the case under FIFO.
In essence, the primary reason for using LIFO is to defer
the payment of income taxes in an inflationary
environment.

12. ANY QUESTIONS?

13. THANK YOU