What is FIFO, LIFO and WAC for inventory valuation?
FIFO(First In First Out) is an asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first. FIFO may be used by a individual or a corporation. For taxation purposes, FIFO assumes that the assets that are remaining in inventory are matched to the assets that are most recently purchased or produced. Because of this assumption, there are a number of tax minimization strategies associated with using the FIFO asset-management and valuation method. LIFO(Last In First Out) 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. LIFO assumes that an entity sells, uses or disposes of its newest inventory first. If an asset is sold for less than it is acquired for, then the difference is considered a capital loss. If an asset is sold for more than it is acquired for, the difference is considered a capital gain. Using the LIFO method to evaluat
