LIFO costing method uses companies & items

hansika

Hello ,



Navision supports 5 costing method s

1. FIFO 2. LIFO 3. Average 4. Specific 5 Standard.

I know most of the comapnies using FIFO, AVERGE, SPECIFIC, Standard.

I could not find any companies using the LIFO costing method.

what i would like to know is which comapnies can use this method ?

for what type of materials will have the LIFO costing method ?

Did any expert use this LIFO costing method in their implementation ?

share your experience about his.

ara3n

Companies would use LIFO Costing method, where the Cost of the good is steadily rising.

DenSter

Theoretically by using the most recent cost (the higher ones) you can decrease the taxable income by using the most expensive cost to deduct from the revenue, you keep taxable revenue as low as possible, and you pay less taxes. I don't buy it, because over time though it's all a wash, eventually you use all of your product anyway. It's just an accounting trick really.

The rule of thumb is to use the costing method that matches your way of handling your inventory. Think of it in a supermarket. When you stock new product on the shelf, do you push existing stock to the back, or do you put the new stock in the back? The first case is LIFO, the last case is FIFO.

Personally what I think makes most sense is either standard or specific. All other costing methods are artificial in my opinion, and once you start using them, costing is an abstract exercise anyway.

kapil4dynamics

Yeah and it is getting unacceptable as well after global use of IFRS. "Last in first out" (LIFO) is not acceptable (IAS2.25).

Refer this : http://en.wikipedia.org/wiki/Internatio ... _Standards

Alex_Chow

Any companies can use whatever costing method they wish. The bottom line is how the cost of the item will be recognized.

Most of the time, the costing method is recommended by their CPA.