In times of rising prices, why would a company choose LIFO over FIFO in the context of cryptocurrency trading?
Trần VũDec 26, 2021 · 3 years ago1 answers
In the context of cryptocurrency trading, when prices are rising, why would a company prefer to use the LIFO (Last-In, First-Out) method instead of the FIFO (First-In, First-Out) method? What are the advantages and disadvantages of choosing LIFO over FIFO in this situation?
1 answers
- Dec 26, 2021 · 3 years agoIn the context of cryptocurrency trading, choosing between LIFO and FIFO can be a strategic decision for companies. When prices are rising, using the LIFO method allows companies to report lower costs of goods sold, which can lead to higher profits. By valuing the most recently acquired cryptocurrencies as sold first, companies can take advantage of the increasing prices and minimize their tax liabilities. However, it's important to consider the potential drawbacks of using LIFO, such as the possibility of inventory understatement and higher carrying costs. Ultimately, the decision should be based on the specific goals and circumstances of the company, as well as the trade-offs they are willing to make in terms of accurate inventory valuation and tax optimization.
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