Last-in First-Out (LIFO) Law and Legal Definition

Last-in First-Out (LIFO) method is used when one cannot specifically identify items of inventory and the quantity of inventory was purchased at different times at various prices. Therefore, the LIFO method is an asset management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold, or disposed of first. It is to be noted that, when prices fall down, then LIFO will produce a smaller cost of goods sold and a higher closing inventory.