Therefore, when COGS is lower (as it is under FIFO), a company will report a higher gross income statement. Under LIFO, remaining inventory may not be a reflection of market value. This is because older inventory was often purchased at a lower Backtesting price and the market may have changed…

The pros and cons listed below assume the company is operating in an inflationary period of rising prices. The last-in, first-out (LIFO) method assumes that the last unit making its way into inventory–the newest inventory–is sold first. Therefore, the older inventory is left over at the end of the accounting…