Financial Accounting

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Inventory Valuation: Income Tax Effect


Some companies use the First-In, First-Out (FIFO) Inventory valuation method while others use the Last-In, First-Out (LIFO) Inventory valuation method.

When filing an income tax return, a company will prefer the

Inventory valuation method during times of price inflation, because the amount of net income is

than when using the

Inventory valuation method.