Accuracy in Financial Reporting: FIFO provides a more accurate reflection of the current market value of inventory. Regulatory Compliance: FIFO is widely accepted and often required by accounting standards like GAAP and IFRS. Reduction in Waste: FIFO helps in minimizing spoilage and obsolescence, especially for perishable or time-sensitive goods. Profitability: FIFO can result in higher profits during periods of inflation, as the older, cheaper costs are matched against current revenues.