Definition: An accounting system used to value inventory for tax purposes.
Under FIFO, inventory is valued at its most recent cost.
FIFO was the traditional method used by most businesses before
inflation became common. Under FIFO, the goods you receive first
are the goods you sell first. Under this method, you value
inventory at its most recent price. FIFO is usually used during
periods of relatively low inflation since high inflation and
increasing replacement costs tend to skew inventory accounting
figures.