LIFO vs FIFO

LIFO

FIFO

higher COGS lower COGS
lower taxes higher taxes
lower net income higher net income
lower inventory balances higher inventory balances
higher cash flows (less tax paid out) lower cash flows (more tax paid out)
lower net and gross margins higher net and gross margins
lower current ratio higher current ratio
higher inventory turnover lower inventory turnover
DA and DE higher DA and DE lower

 

Under IFRS the permissible cost flow methods are:

  • Specific Identification
  • FIFO
  • Weighted average cost