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 IFRS Foundation's IAS 2 summary 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.