What does HIFO stand for?

HIFO (Highest In, First Out) is an inventory valuation method in which the most expensive stock is assumed to be issued from the warehouse first. This leaves the remaining inventory valued at the lowest purchase prices.

How HIFO works

Under HIFO, goods are valued by price rather than by the date they arrived. Removing the highest-cost items first records higher costs against sales and keeps the ending inventory value low on the balance sheet, which can reduce taxable profit for a period.

Where HIFO is used

HIFO is a deliberately conservative valuation. It is used in some countries but is not permitted under German commercial and tax law. It relates to how stock is tracked in warehouse management, alongside methods such as FIFO and LIFO.