Companies are not allowed to report inventory costs by assuming which units of inventory are sold and which units still remain on hand.Companies can assume which inventory units are sold and still remain on hand using a variety of methods (FIFO,LIFO,and weighted-average cost).

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Companies are required to use a consistent inventory method for reporting purposes, but they are not allowed to assume which units of inventory are sold and which remain on hand. They must use actual physical inventory counts to determine ending inventory and cost of goods sold. The use of FIFO, LIFO, and weighted-average cost methods is allowed, but these methods still require the use of actual physical inventory counts to calculate the unit costs used in these calculations.

Companies Are Not Allowed to Report Inventory Costs by Assuming