Under FIFO, the cost of goods sold is based on the oldest costs. Thus, relative to using LIFO, the FIFO method will result in higher net income during periods of rising prices, which will increase a company’s income tax liability. In the balance sheet, the FIFO method reports inventory at the most current costs. The LIFO method, on the other hand, reports the same inventory at older, more conservative, and perhaps out-of-date costs.