HIFO stands for Highest In First Out. It is a warehouse valuation technique that requires products to be stored in a specified order. The things are held here according to price, therefore the most expensive items are taken out of stock first. As a result, the inventory is valued at its low acquisition pricing. When inventory is taken, HIFO is utilized to portray strong sales on the balance sheet while keeping the ending inventory value low.
The strategy is used to lower taxable income for a set period of time. HIFO is commonly utilized in other countries, however it is not permissible under German commercial and tax law. One benefit is the conservative valuation, as inventory is valued at cheap prices here.
