First In, First Out - FIFO

DEFINITION of 'First In, First Out - FIFO'

An asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first. FIFO may be used by a individual or a corporation.

BREAKING DOWN 'First In, First Out - FIFO'

For taxation purposes, FIFO assumes that the assets that are remaining in inventory are matched to the assets that are most recently purchased or produced. Because of this assumption, there are a number of tax minimization strategies associated with using the FIFO asset-management and valuation method.

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RELATED FAQS
  1. How can the first-in, first-out (FIFO) method be used to minimize taxes?

    The first-in, first-out (FIFO) inventory cost method can be used to minimize taxes during periods of rising prices, since ... Read Full Answer >>
  2. What are the disadvantages of the FIFO accounting method?

    The first-in, first-out (FIFO) accounting method has two key disadvantages. It tends to overstate gross margin, particularly ... Read Full Answer >>
  3. What are the differences between a change in accounting principle and a change in ...

    One area where the Fair Accounting Standards Board, the FASB, and the International Accounting Standards Board, the IASB, ... Read Full Answer >>
  4. How do you calculate the cost basis for a mutual fund over an extended time period?

    Investors must pay taxes on any investment gains they realize. Subsequently, any capital gain realized by an investor over ... Read Full Answer >>
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