What are the differences between FIFO, LIFO, and HIFO inventory costing methods and how do they impact a company's financial statements?

The main differences between FIFO, LIFO, and HIFO inventory costing methods lie in how they value inventory. FIFO (First-In-First-Out) assumes that the oldest inventory is sold first, LIFO (Last-In-First-Out) assumes that the newest inventory is sold first, and HIFO (Highest-In-First-Out) values inventory based on the highest cost items first. These methods can impact a company's financial statements by affecting the reported cost of goods sold, net income, and taxes paid.