In conditions of high inflation, nonmonetary assets tend to be stated on the balance sheet at values

Question:

In conditions of high inflation, nonmonetary assets tend to be stated on the balance sheet at values far below their replacement costs. Inventory accounting can further complicate historical analysis for companies in such an environment. Which accounting methodology would better represent the true value of the inventory in periods of high inflation: last-in first-out (LIFO) or first-in first-out (FIFO)? How would this change in a period of deflation?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...