LIFO
How Tariffs & Inflation Reinforce the Value of LIFO
Recent tariffs imposed by the Trump administration have reintroduced import taxes on a wide range of goods. While the goal
Sara Richardson
May 5, 2025
LIFO stands for “Last-In, First-Out.” It’s an inventory cost flow assumption and identification method that assumes the most recently purchased items are sold first.
In order to use LIFO, a company must formally elect to do so through filing Form 970 – Application to Use LIFO Inventory Method. Should a company wish to make any changes to the accounting method, they must do so on Form 3115 – Application for Change in Accounting Method. The company is also required to use LIFO for financial reporting purposes, the “LIFO conformity requirement.”
LIFO can reduce income taxes during periods of inflation by increasing the cost of goods sold (COGS), leading to lower taxable income. It can also simplify record-keeping for certain industries.
Any company affected by inflation and with a substantial inventory may use LIFO. Manufacturers, retailers, and wholesalers all use LIFO. Various industries such as oil & gas, chemical, metal, lumber, hardware, grocery, and building supplies all use LIFO.
Can't find what you're looking for?
We would love to chat with you.
Recent tariffs imposed by the Trump administration have reintroduced import taxes on a wide range of goods. While the goal
Inventory identification is a crucial aspect of managing a company’s finances. It impacts your cost of goods sold (COGS), profitability,
Inventory valuation is an accounting process used by companies to assign value to their inventory. It determines the cost of
Inventory valuation is an accounting process used by companies to
Understanding LIFO as an effective mitigation strategy for inflation is