In the U.S., accountants often cite LIFO as the preferred method when products' costs are changing. The reason is the matching of the latest costs of products with the sales revenues of the current period. U.S. tax rules also allow for either FIFO or LIFO, but require that the same cost flow assumption be used on both the company's tax return and on the company's financial statements.
By using LIFO when the costs of products are increasing, the company will be matching the recent higher costs with the current period sales. This will provide not only the improved matching of costs with revenues, it will also result in lower taxable income.
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