LIFO cost flow

LIFO assigns the most recent available costs to expense first. It does not require workers to ship the newest physical unit. Shipment records establish physical movement; the accounting schedule establishes cost assignment.

Periodic LIFO applies the period's total removals against the latest costs in full-period goods available. Perpetual LIFO applies each sale against layers available on that date. A later purchase can enter the periodic assignment but cannot enter a perpetual sale that occurred earlier. The two systems can therefore report different cost of goods sold and ending layers.

Build both schedules from dated quantities and supported unit costs. Do not let a layer go negative or reach forward to an unavailable purchase. Reconcile ending units to opening units plus purchases less sales. Reconcile cost of goods sold plus ending inventory to goods available at cost. These checks test execution, not ownership, cost eligibility, or method approval.

Compare LIFO with FIFO

FIFO starts at the oldest end of the available cost stack. LIFO starts at the newest end. FIFO therefore tends to leave recent layers on hand, while LIFO can preserve old layers. These accounting directions do not prove the warehouse's physical flow.

Rising costs often produce higher cost of goods sold and lower ending inventory under LIFO than under FIFO. A falling or mixed cost stream can change that comparison. Periodic and perpetual timing can also change LIFO results, so the dated schedules remain the evidence.

ASC 330-10-30-9 identifies LIFO as a US-GAAP cost-flow assumption. ASC 330-10-50-1 requires disclosure of the inventory basis and significant changes. The official IAS 2 overview lists specific identification, FIFO, and weighted average; it does not include LIFO. Confirm the reporting framework before comparing amounts.

Work through the Cedar LIFO example, then complete the independent Northstar practice.