Life should be used for the income statement, because of lower earnings correct. And Fifo for inventory under the Balance sheet, this reports higher values. Why aren’t low inventory $$ values good? This means that the company is saying it has fewer assets and is more conservative?
This is under inflationary prices (the usual case). Prices are rising, but I remains low because we are using the old prices. This misrepresents the actual value of the inventory which should be measured according to its REPLACEMENT cost. Assuming the firm is a going concern, every unit of inventory used means the firm has to spend to replace it.