Highest In, First Out - HIFO


DEFINITION of 'Highest In, First Out - HIFO'

In accounting, an inventory distribution method in which the inventory with the highest cost of purchase is the first to be used or taken out of stock. This will impact the company's books such that for any given period of time, the inventory expense will be the highest possible.

BREAKING DOWN 'Highest In, First Out - HIFO'

Companies would likely choose to use the HIFO inventory method if they wanted to decrease their taxable income for a period of time. Because the inventory that is recorded as used up is always the most expensive inventory the company has (regardless of when the inventory was purchased), the company will always be recording maximum cost of goods sold.

Contrast this with other inventory recognition methods such as last in, first out (LIFO), in which the most recently purchased inventory is recorded as used first, or first in, first out (FIFO), in which the oldest inventory is recorded as used first. Companies may occasionally change their inventory methods in order to smooth their financial performance.

  1. Specific Identification Inventory ...

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  2. Last In, First Out - LIFO

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  3. Cost Of Goods Sold - COGS

    Cost of goods sold (COGS) are the direct costs attributable to ...
  4. First In, First Out - FIFO

    An asset-management and valuation method in which the assets ...
  5. Carrying Cost Of Inventory

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  6. Inventory

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