Depending on the cost flow method used the cost of ending inventory and the cost of goods sold reported are directly affected. It is in fact critical for companies to decide which cost flow method to adopt, and there are several factors that affect their decision. The first factor that limits the choice of companies is the requirements of regulatory bodies. LIFO is forbidden by most of the regulators especially by the ones in hyper-inflationary economies. The other factor which affects the decision made is the purpose of the company. In other words, if the company is planning to sell its shares in the market, then it wants to be evaluated as a profitable company and would prefer to choose the method which will show its financials in a more profitable way. On the other hand, if a company wants to pay less tax, then it would prefer to choose the method which will show the company less profitable.