Last In, First Out (LIFO) is an inventory valuation method used in accounting to manage and assess the cost of inventory. Under LIFO, the most recently acquired items are assumed to be sold first. This approach can affect financial reporting, particularly in periods of inflation, as the cost of goods sold reflects more recent, typically higher prices, resulting in lower taxable income and a reduced tax liability. However, LIFO is not permitted under International Financial Reporting Standards (IFRS), limiting its use to countries like the United States where it aligns with specific accounting standards.