Next-In, First-Out - NIFO

AAA

DEFINITION of 'Next-In, First-Out - NIFO'

A method of valuation where the cost of a particular item is based upon the cost to replace the item rather than on it's original cost. This form of valuation is not one of the generally accepted accounting principles (GAAP) because it is said to violate the cost principle. The cost principle is an accounting concept that states that goods and services should be recorded at their original cost, not present market value.

INVESTOPEDIA EXPLAINS 'Next-In, First-Out - NIFO'

For example, an item that originally cost $15, and has a replacement cost of $18, is sold for $28. With the NIFO valuation method, gross profit would be $10 ($28 minus $18), not $13. Some companies use this method during times when inflation is a factor. Companies will set a selling price on replacement-cost basis and use this method as a way to price the items it sells.

RELATED TERMS
  1. Financial Statements

    Records that outline the financial activities of a business, ...
  2. Accounting Method

    The method by which income and expenses are reported for taxation ...
  3. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  4. Cash Cost

    A cash basis accounting cost recognition process that classifies ...
  5. Historical Cost

    A measure of value used in accounting in which the price of an ...
  6. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...
Related Articles
  1. A Clear Look At EBITDA
    Markets

    A Clear Look At EBITDA

  2. The One-Time Expense Warning
    Fundamental Analysis

    The One-Time Expense Warning

  3. The Flow Of Company Information
    Investing Basics

    The Flow Of Company Information

  4. Understanding The Income Statement
    Forex Education

    Understanding The Income Statement

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center