Hi,

Changing the inventory costing method in Odoo from FIFO to Average Cost has important technical and functional consequences that must be managed carefully. Functionally, FIFO values outgoing stock using the oldest purchase cost, while Average Cost recalculates the product’s cost after every receipt and uses that average for all issues. This means that after switching, your cost of sales and stock valuation will no longer track actual purchase layers but instead follow a smoothing average. Technically, the change is applied at the product category level, and Odoo will only use Average Cost for new transactions going forward; past stock moves remain valued with FIFO, so the system does not recalculate history. If stock is not properly managed before switching, this can lead to mixed valuation layers and inaccurate reports. To prevent issues, it is best practice to close your accounting periods, generate a final stock valuation report under FIFO as a baseline, and ideally perform an inventory adjustment to bring stock to zero on the cut-off date. After switching to Average Cost, you can then re-import opening balances with the correct average values. This ensures a clean transition and prevents distorted P&L or Balance Sheet figures. Testing the process in a staging environment and coordinating closely with the finance team is essential, since auditors will expect clear documentation of the change and its impact. In short, the transition should be treated like a controlled financial cutover, not just a configuration change.

For more information,

* https://www.cybrosys.com/blog/how-to-set-up-accurate-costing-methods-in-odoo-18

* https://www.youtube.com/watch?v=jmRXo9eDJUk

* https://www.odoo.com/documentation/18.0/applications/inventory_and_mrp/inventory/product_management/inventory_valuation/inventory_valuation_config.html

Hope it helps