Final answer:
The inventory valuation method that assumes newer items are used before older items is known as Last-In, First-Out (LIFO).
Step-by-step explanation:
When inventory is valued by assuming that newer items are used before older items, the valuation method being used is known as Last-In, First-Out (LIFO). This method assumes that the most recently acquired goods are sold or used first, therefore, the items remaining in inventory are the oldest. It contrasts with the First-In, First-Out (FIFO) method, where it is assumed that the oldest items are sold first. The use of LIFO can influence the financial statements, particularly in times of inflation, by lowering reported income and thereby reducing income taxes. However, it can also result in inventory that is valued much lower than current market prices on the balance sheet.