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Accounting
FIFO
First-In, First-Out — the method of valuing inventory where the oldest items are assumed to be sold first.
FIFO is required under IFRS and is common in the US. It usually results in higher reported profits and higher inventory values during rising prices. The opposite method is LIFO.
It's like a supermarket queue — the milk that arrived first gets sold first.
Real world: During inflation, FIFO shows higher profits because older (cheaper) inventory is recorded as cost of goods sold. This makes the balance sheet show more recent (higher) costs in ending inventory.
💡 FIFO matches the physical flow of goods for most businesses.