Meaning and example
LIFO is a cost-allocation assumption under which the costs of the most recent receipts are assigned to issues first. For two batches—ten units at 100 and ten at 140—selling 12 in a simple periodic model produces a cost of 1600 and a closing balance of 800. Comparing it with FIFO shows the effect of the allocation order, not a different purchase-payment amount. This illustration does not authorize use of the method: the official IAS 2 overview does not include LIFO among the permitted cost formulas for interchangeable inventories. Requirements for another system must be checked separately.
How to avoid a mistake
LIFO stands for last in, first out: the most recently received cost is expensed first. The closing balance contains earlier price layers, not necessarily older physical items. When quantities change, periodic and perpetual results may differ; state the calculation regime before comparing them, and do not infer tax consequences from the example.
More on the relationship between cost and write-downs: [the educational analysis](/guides/inventory-cost-nrv/).
Sources and review boundaries
Support: **report-ias2**. The example is editorial. Sources check the concept, but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.