Can you explain the LIFO principle?

Can you explain the LIFO principle?

Sure! LIFO stands for 'Last In, First Out.' It's an inventory valuation method where the most recently purchased items are sold first.

How does LIFO affect financial statements?

Using LIFO can lead to lower taxable income during inflation, as the cost of goods sold reflects higher recent prices.

Are there any disadvantages to using LIFO?

Yes, one disadvantage is that it can result in outdated inventory values on the balance sheet, which may not reflect current market conditions.

Is LIFO allowed under IFRS?

No, LIFO is not permitted under IFRS. Companies must use other methods like FIFO or weighted average cost.