LIFOprincipe

LIFOprincipe, commonly referred to as the LIFO principle, describes a rule for processing items where the most recently added element is the first to be removed. The concept appears in two main domains: data structures, where it governs the behavior of stacks, and inventory accounting, where it serves as a cost flow assumption.

In the context of data structures, a stack implements LIFO behavior. Elements are pushed onto the top of the stack and popped from the same top, so the last element inserted is the first to be removed. This yields constant time complexity for push and pop operations and is used in parsing expressions, managing function calls, and evaluating backtracking algorithms.

In accounting and inventory management, the LIFO method assigns the cost of goods sold to the most recently purchased items, while the ending inventory is valued using older costs. Under LIFO, rising prices often lead to higher cost of goods sold and lower reported profits, with lower taxable income in the short term (subject to jurisdictional rules). LIFO is permitted under US GAAP but generally not allowed under IFRS, which tends to favor FIFO or weighted average.

Limitations and trade-offs include potential distortions in financial reporting, liquidation of older layers during periods of shrinking inventory, and compliance requirements. In software, LIFO stacks are straightforward but unsuitable for FIFO-specific use cases such as queueing or order-by-newest-first under certain conditions.

See also: Stack (data structure), FIFO, COGS.