BC9 The combination of the previous version of IAS 2 and SIC‑1 Consistency - Different Cost Formulas for Inventories allowed some choice between first‑in, first‑out (FIFO) or weighted average cost formulas (benchmark treatment) and the last‑in, first‑out (LIFO) method (allowed alternative treatment). The Board decided to eliminate the allowed alternative of using the LIFO method.
BC10 The LIFO method treats the newest items of inventory as being sold first, and consequently the items remaining in inventory are recognised as if they were the oldest. This is generally not a reliable representation of actual inventory flows.
BC11 The LIFO method is an attempt to meet a perceived deficiency of the conventional accounting model (the measurement of cost of goods sold expense by reference to outdated prices for the inventories sold, whereas sales revenue is measured at current prices). It does so by imposing an unrealistic cost flow assumption.
BC12 The use of LIFO in financial repo
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