All 5 Inventory Valuation (FIFO/LIFO/AVCO) questions
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What is the FIFO method of inventory valuation? Work out closing inventory using AVCO. What does 'lower of cost and net realisable value' mean (IAS 2)? Is LIFO permitted under IFRS, and why?
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How do FIFO, LIFO and AVCO differ during rising prices?

Intermediate

Answer

In inflation FIFO gives the lowest cost of sales and highest profit; LIFO gives the highest cost of sales and lowest profit; AVCO (weighted average) sits in between.
Rising prices: FIFO -> higher profit; LIFO -> lower profit
Real-world example Method choice affects reported profit and tax, so it must be consistent.
All 5 Inventory Valuation (FIFO/LIFO/AVCO) questions