Impact of Inventory Valuation Methods
We discussed the impact of LIFO and FIFO valuation methods on COGS, ending inventory, and gross profits under the increasing prices scenario under inflationary and deflationary scenarios. The following table summarizes the impact of LIFO and FIFO under the inflationary scenario (rising prices).
| FIFO | LIFO | |
| COGS | Lower | Higher |
| Ending Inventory | Higher | Lower |
| Gross Profits | Higher | Lower |
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LESSONS
- Inventory - Introduction
- Costs Included in Inventory
- Inventory Valuation Methods
- Inventory Accounting Analysis and Inflation/Deflation
- Perpetual Vs. Periodic Inventory Systems
- Impact of Inventory Valuation Methods
- Inventory at Net Realizable Value
- Disclosures Relating to Inventories
- Impacts of LIFO and FIFO Inventory Methods on Selected Financial Ratios
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