LIFO Method

Under U.S. GAAP LIFO, the last costs inventoried are the first costs transferred to cost of goods sold. Ending inventory, thus, includes the oldest costs. The ending balance of inventory will typically not approximate replacement cost. LIFO does not generally relate to actual flow of goods because most organizations sell or use their oldest goods first to prevent holding old or obsolete items. See also specific identification method and FIFO method and weighted average method and moving average method and LIFO layers and dollar value LIFO.