TLDR:
LIFO is an inventory cost accounting method where the most recently acquired items are assumed to be sold first, which can reduce taxable income during inflationary periods.
LIFO vs. FIFO — Business Implications
The choice between LIFO and FIFO inventory accounting methods has significant business and tax implications. During inflationary periods, LIFO results in higher cost of goods sold (as more expensive recent purchases are matched to sales first), lower taxable income, and thus lower tax liability — which is why many capital-intensive businesses in the US prefer LIFO. However, LIFO is prohibited under IFRS (used by most countries outside the US), which creates complications for companies with international operations or those planning to list on international exchanges.