Specific identification definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Specific identification can be defined as: Method for assigning cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of goods sold and/or of inventory. Specific identification is a way to track inventory cost, specific identification usually requiring each item of inventory to be identified using an identification number. When inventory is then sold we can track the exact cost of that inventory, the cost specifically identified to that inventory. Specific identification is often used with larger, costlier, and often more distinct or differentiated inventory. When inventory is less costly and all the same specific identification may be too costly and a shorthand cost flow assumption may be used of FIFO, LIFO, or an average cost method.
