Under FIFO, closing inventory is valued at the most recent costs; when prices are rising, cost of sales appears lower and profit higher. TMS 2 permits FIFO and weighted average cost but not LIFO.
Source: TMS 2
Related terms
Inventories (TAS 2)Assets held for sale in the ordinary course of business, in the process of production, or as raw materials and supplies to be used in production.Net realisable valueThe estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.Gross profitProfit calculated by deducting cost of sales from revenue.Accounting estimatesThe determination by management judgement of amounts that cannot be measured precisely, such as provisions, useful lives, expected credit losses and fair values.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Accrual basis of accountingThe principle of recording transactions as income, expenses, assets and liabilities in the period in which they occur, rather than when cash is received or paid.
Last updated: October 31, 2026 · This definition is for general information only.