Accounting Glossary

LIFO (Last-In, First-Out)

Definition

An inventory costing method assuming the most recently purchased inventory items are sold first. LIFO is permitted under US GAAP but not under IFRS. It results in lower net income during periods of rising prices.

Example

If you buy 10 units at $10 then 10 at $12, LIFO assumes the $12 units are sold first.

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