LOFO (Lowest In - First Out)

What does LOFO mean?

LOFO (Lowest In – First Out) is a simplification procedure used in accounting to value current assets according to acquisition or production costs. It assumes that the inventories with the lowest procurement value are consumed or sold first. The consequence of LOFO is that the procedure leads to a rather optimistic valuation of inventories because all remaining inventories have high acquisition costs. For this reason, it is viewed critically by international standards.

Other methods are FIFO (First In – First Out), HIFO (Highest In – First Out) and LIFO (Last In – First Out).

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November 26th