Saltar a zona de contenidos

Financial Dictionary - FIFO

FIFO

First-in, First-out

This is an accounting valuation method used to calculate the value of an inventory, or similar units, in relation to its cost and sale price. This inventory may be the company's products, the raw materials it uses for its work, or the components necessary to carry out this activity in the normal way. The FIFO criterion is commonly used when valuing inventories made up of expired or perishable products. It confirms the necessary order so that all the items that enter first, are released as soon as close as possible to their expiry date or obsolescence period.

This system is used for tax calculations under tax regulations in force in Spain.

FIFO applied to the investment ecosystem

The investor should take into account that FIFO rules (First in, First out) apply to the calculation of capital gains from the sale of units in a fund, i.e. the first units that entered the portfolio are sold first.

FIFO in inflation periods

In inflation periods, i.e. when there is an economic imbalance caused by production and demand which encourages the prices of products and services to rise, and the price of money used to buy or use them to fall, the FIFO variable acts as a method which increases profits due to allocating a lower cost to the goods sold, which is positive when presenting results to shareholders, creditors, etc. but negative when paying taxes.

Plus

How do funds work?

Have a question? Check the details and tax treatment of our investment funds.
Find out more

Fund finder

Use our investment fund finder to discover the best funds for your investor profile.
Find out more about Fund finder