Dollar-Value LIFO

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DEFINITION of 'Dollar-Value LIFO'

An accounting method used for inventory that follows the last in, first out model. Dollar value LIFO uses this approach with all figures in dollar amounts, rather than in inventory units. It provides a different view of the balance sheet than other accounting methods such as first in, first out (FIFO).

INVESTOPEDIA EXPLAINS 'Dollar-Value LIFO'

If inflation and other economic factors (such as supply and demand) were not an issue, dollar-value and non-dollar-value accounting methods would have the same results. However, since costs do change over time, the dollar-value LIFO presents the data in a manner that shows an increased cost of goods sold (COGS) when prices are rising, and a resulting lower net income. When prices are decreasing, dollar-value LIFO will show a decreased COGS and a higher net income. Dollar value LIFO can help reduce a company's taxes (assuming prices are rising), but can also show a lower net income on shareholder reports.


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