Lifo procedure (last in - first out)

Definition of the Lifo process

The Lifo method is a consumption sequence method that is intended to simplify the assessment. It is permissible according to the German Commercial Code (HGB) and is used to determine the acquisition or Manufacturing costs similar items of inventory. It is assumed that the items purchased last are always used or sold first (last in - first out).

This behavior aims, apart from a simplified determination of the acquisition or production costs, to bill the material consumption within the scope of the acquisition value principle, ie at prices that are as close to the present as possible. A distinction must be made between:

permanent Lifo procedure

The permanent Lifo procedure, in which the material consumption is continuously recorded and evaluated throughout the year.

The Period Lifo Procedure

The Period Lifo Procedure than the method generally used in practice. Only the final stock is compared in terms of quantity with the initial stock.

Which of the two process technologies of the Lifo process is chosen, the usual considerations are always Balance sheet date with regard to compliance with the strict lowest value principle (Section 253 (3) HGB). According to IFRS, the Lifo procedure is no longer permitted from 2005 onwards.

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