What is the impact of FIFO and LIFO on taxation?

What is the impact of FIFO and LIFO on taxation?

FIFO (First In, First Out) and LIFO (Last In, First Out) are inventory valuation methods that can significantly affect taxable income.

How does FIFO affect my taxes compared to LIFO?

Using FIFO typically results in lower cost of goods sold during inflation, leading to higher taxable income and taxes.

And what about LIFO?

LIFO usually results in higher cost of goods sold during inflation, which can lower taxable income and reduce taxes.

Are there any restrictions on using LIFO for tax purposes?

Yes, LIFO is not allowed under IFRS, and companies must adhere to specific IRS regulations to use it in the U.S.