noamnoam
|
First, relating to raysor's comment, of course the oldest inventory should be used first. This is called inventory rotation and has to do with the physical inventory and has nothing to do with how the accounting is done.
In periods of inflation, as we have now and probably will continue to have, the older inventory is presumed to have a lower cost. FIFO is a problem because it matches current sales with old, cheap inventory. This ignores the true cost of replacing the goods sold. It inflates profits and lead to higher taxes on the inflated profits and it allows executives to claim bonuses for higher performance. This last bit is why it is used; the inaccuracies make management look good.
 Posted 538 days ago
|