Final answer:
Most companies that use a LIFO inventory system opt for the dollar-value LIFO method, which helps to simplify inventory tracking and adjust for inflation effects by grouping inventory into pools and applying current costs.
Step-by-step explanation:
The method employed by most companies that use a Last-In, First-Out (LIFO) system is dollar-value LIFO. This method updates the inventory layers by using current costs instead of the actual prices at which specific units were bought. By doing so, the dollar-value LIFO method simplifies the tracking of inventory and helps in mitigating the effects of inflation on inventory costs.
With the dollar-value LIFO method, companies group items into pools based on similarity in price change. This way, they avoid having to track the individual costs of every single piece of inventory. As prices rise due to inflation, companies using the dollar-value LIFO method are better able to match current revenues with current costs, providing a more accurate financial picture.