# LIFO vs FIFO

*Accounting & Reporting — Finicade finance glossary*

FIFO assumes the oldest inventory sells first; LIFO assumes the newest does. In an inflationary period LIFO reports higher COGS and lower profit — and therefore lower tax, which is the whole reason US firms use it. IFRS bans LIFO entirely, so a US company can report materially different profit than an identical European one. LIFO reserves disclosed in the notes let you convert between them.

**Also known as:** LIFO, FIFO, inventory costing method

**Related terms:** [Inventory](https://finicade.com/glossary/inventory), [Cost of Goods Sold](https://finicade.com/glossary/cost-of-goods-sold), [Gross Margin](https://finicade.com/glossary/gross-margin), [IFRS vs GAAP](https://finicade.com/glossary/ifrs-vs-gaap), [Inflation](https://finicade.com/glossary/inflation)

Source: https://finicade.com/glossary/lifo-vs-fifo