FIFO (first-in, first-out) and LIFO (last-in, first-out) are inventory cost-flow assumptions. FEFO (first-expiry, first-out) is a physical picking policy. A cost-flow assumption assigns costs to goods sold and goods remaining; a picking policy identifies the eligible physical stock to use next. They answer different questions.
Compare the methods
| Method | Purpose | Rule |
|---|---|---|
| FIFO accounting | Cost assignment | Oldest purchase costs enter COGS first |
| LIFO accounting | Cost assignment | Newest purchase costs enter COGS first |
| Weighted average | Cost assignment | Blend eligible acquisition costs across available units |
| FIFO picking | Physical rotation | Use the oldest eligible receipt first |
| FEFO picking | Physical rotation | Use the eligible, unexpired lot with the earliest expiry first |
An expired, quarantined or otherwise unsuitable lot is not made usable by a FEFO rule. Follow the product's actual handling instructions and the business's approved release and storage procedures.
The lists FIFO or weighted average for ordinarily interchangeable inventory and specific identification for non-interchangeable items. FIFO is therefore not the only IFRS option. LIFO is not an IAS 2 cost formula. Select and maintain the accounting method with the accounting owner under the framework that applies to the business.