LIFO Turnkey Outsourcing Solutions

IRS LIFO Requirements
IRS Annual LIFO Calculation Requirement & LIFO Conformity Rule (See IRS Regs. §472(c), §472-2(e) & §472-2(g))
- Taxpayers are required to annually calculate the ending LIFO inventory value beginning in the year that LIFO is adopted for tax purposes, and all subsequent periods that the LIFO method is used
- The IRS LIFO conformity rule requires taxpayers to present income on year end financial report/statements as determined under the LIFO method beginning with the first year that LIFO is used on the tax return (also applies for all subsequent year end financial reports/statements where the LIFO method is used for tax purposes)
- A LIFO adjusting journal entry must be made annually following the close of the year end, completion of the LIFO calculation & prior to preparing year end financial reports/statements to comply with the LIFO conformity rule
IRS LIFO Books & Records Requirement (See IRS Regs. §472-2(h))
- A taxpayer’s current LIFO value inventory is a historic accumulation of quantity & price changes from the taxpayer’s initial year of the LIFO election
- Therefore, the taxpayer must maintain supplemental & detailed LIFO inventory records that support the current value of the inventory & the clear reflection of income
The IRS may terminate a taxpayer’s LIFO election if the taxpayer fails to comply with any of the requirements listed above. See Rev. Proc. 79-23, Sec. 3.01.
Outsourcing Engagement Overview
LIFOPro’s Responsibilities
- Preparing all aspects of the LIFO calculation & supporting documentation free of errors and in accordance with IRS Regs., including
  - Inflation calculation (including BLS category assignments for companies using the IPIC method)
  - Layer calculations
  - LIFO inventory value, LIFO reserve & LIFO reserve change calculations
- Prepare documentation (LIFOPro reports) that provide adequate books & records of the LIFO inventory value & all supporting computations
- Deliver LIFOPro report package that includes all amounts required for the client to complete the following:
  - Record this year’s LIFO journal entry which will adjust the year end inventory balance to its LIFO value
  - Prepare the year end annual financial report/statement on a LIFO basis
  - Prepare year end tax return on a LIFO basis
  - Net inventory method adjustments (if applicable; for auto dealers using net inventory method)
- Interim LIFO estimate preparation & delivery (if applicable)
- Preparing the book vs. tax LIFO Schedule M tax return entry value (if applicable)
- Preparing the §263A UNICAP cost Schedule M entry value (if applicable; using the client-provided absorption ratio)
- Preparing IRS forms & statements related to LIFO elections or accounting method changes (if applicable)
- Preparing supporting documentation related to any pro forma LIFO calculations, reviews or accounting method changes (if applicable)
- Up to 40 hours of audit support related to the services provided by LIFOPro
CPA Firm or Client Responsibilities
- Prepare & furnish the documents required by LIFOPro to complete our services
- Review LIFOPro report package and confirm all applicable amounts match the client’s books and records
- Record the annual LIFO adjusting journal entry
- Prepare the tax return on a LIFO basis
- Prepare annual financial reports/statements on a LIFO basis
- Notify LIFOPro of any LIFOPro report discrepancies discovered by the client or notify LIFOPro of adjustments made after LIFOPro report delivery that would affect the accuracy of the client’s LIFO inventory value (if applicable)
- Attach IRS forms & statements related to LIFO elections or LIFO accounting method changes to the tax return (if applicable)
LIFOPro Outsourcing Engagement Process Flow: First Year

LIFOPro Outsourcing Engagement Process Flow: Recurring Annual Calculation Services
Outsourcing Fee Schedule
LIFOPro strives to provide the highest quality of services at the most competitive prices, and we promise to provide an outsourcing solution that fits your budget. Fees listed below are general estimates.
- Pricing is based on company size & engagement scope
- Terms are for a one-year period & are free of multi-year commitments
- Recurring annual fee is guaranteed to remain the same for at least 3 years
- LIFOPro reports delivered electronically including comprehensive documentation of all LIFO amounts required to record adjusting general ledger & tax return entries (all reports can be delivered as either Excel/PDF files)
- Also includes:
  - Up to three interim LIFO estimates for companies using external indexes (using most recently published BLS inflation indexes & prior year end product mix & inventory balances)
  - Unlimited report revisions
  - Up to 40 hours of GAAP & IRS audit support
  - Copy of LIFOPro’s annual SOC 1 Type II report
  - Customized supplemental services requested by client
Document Requirements
- Complimentary offerings
  - LIFO election benefit analysis (for clients not on LIFO)
    - Non auto dealers:
      
      Current & prior period’s item detail reports
      
      Completed LIFO election benefit analysis questionnaire
    - Auto dealers
      
      Invoices for all vehicles on hand as of current period & as of prior year end
      
      Completed auto dealer LIFO election benefit analysis questionnaire
  - Best practice & review (for clients already using LIFO): Prior two period’s LIFO calculation documentation
- Turnkey outsourcing solutions
  - Non-auto dealers: Current year end detail report
  - Auto dealers
    - Using alternative LIFO method: Invoices for all vehicles on hand as of current period & as of prior year end
    - Using IPIC method: Year end inventory balances by the following types: Cars, trucks, & parts
    - Supporting documentation of trade discounts, advertising expenses & other adjustments (if applicable; for dealers using net method)
  - All clients
    - Year end summarized trial balance or balance sheet inventory schedule showing all inventory-related general ledger accounts
    - Prior two period’s LIFO calculation documentation (if already on LIFO; first year only)
    - Completed New client onboarding questionnaire (first year only)
    - Executed engagement letter (first year only; EL includes fixed recurring service fees that are valid for three years)
How to Get Started
- Steps listed below are suggestions, but can occur in your desired order and all steps do not have to be followed
- Introductions & document request (optional; you or your client may choose to proceed directly to step two)
  - Company contacts LIFOPro & requests for us host a discovery meeting/call
  - LIFOPro schedules a meeting/call and/or provides document request list
- Analysis/review/fee quote
  - Company sends documents required to obtain review/analysis/fee quote to LIFOPro
  - LIFOPro prepares/delivers analysis/fee quote & sample LIFO reports
  - LIFOPro offers to host a meeting/call to discuss report findings/recommendations & next steps
- Onboarding
  - Company requests to proceed with engagement
  - LIFOPro prepares/delivers engagement letter, year end calculation document request & New client onboarding questionnaire
  - LIFOPro offers to host a kickoff meeting/call
  - Company sends executed engagement letter and completed New client questionnaire to LIFOPro
- Get started today using these links:
  - Schedule meeting/call with LIFOPro
  - Request analysis/review/fee quote
  - Upload files to LIFOPro’s Share File Portal
  - LIFO election benefit analysis questionnaire – Non auto dealers
  - LIFO election benefit analysis questionnaire – Auto dealers
  - Contact Bob Richardson
    - Robert@lifopro.com
    - 531-466-4275
Sample LIFOPro Reports

Sample LIFOPro Report Package - Internal Indexes
Sample LIFOPro Report Package - External Indexes (IPIC Method)
Sample LIFOPro Report Package - Auto Dealer: Using Alternative LIFO Method Method
Sample LIFOPro Report Package - Auto Dealer: Using IPIC Method
Service Organization Control (SOC) Report
- Independent CPA firm issues SOC 1 Type 2 report to LIFO-PRO annually (formerly known as SAS 70 Report)
- Prepared in accordance with AT-C section 320, Reporting on an Examination of Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting
- Report on the fairness of the presentation of management’s description of the service organization’s system and the suitability of the design and operating effectiveness of the controls to achieve the related control objectives included in the description throughout a specified period
- Provides clients & their CPA firms our independent auditor’s annual report on controls & service procedures in place & software used by LIFOPro
- Providing auditors with this report could reduce substantive testing related to LIFO calculation
- Copy of this report is available to LIFOPro clients & their auditors/CPA firms

CPA Firm Partnership Playbook

2024 Top LIFO Election Candidates Guide

Sec. 473 Relief Estimate Request Form

Auto Dealer IPIC LIFO Case Study

2024 LIFO Opportunities & Strategies Guide

How LIFO Works: A Beginner’s Guide to LIFO

How to Identify Clients that are Good LIFO Election Candidates

How to Easily Implement LIFO

Complimentary Interim LIFO Estimate Request Form

Best LIFO Practices & Review

Auto Dealer LIFO Case Study

LIFO Election Benefit Analysis

Downloads

Get information about LIFO-PRO’s offerings, valuable guides & white papers & sample LIFO reports!

IPIC LIFO Guide

Get educated on the Inventory Price Index Computation (IPIC) method, including the origins, advantages & disadvantages, calculation procedures, options & much more!

Service Organization Control Report

Learn how LIFO-PRO receives an annual review of our policies & procedures to provide required assurances to our clients.

LIFO Tax Benefit Calculator

Calculate the potential tax savings from using LIFO & determine your company’s historical inflation percentages!

Secure File Upload Portal

Here you can send us all files needed for us to seamlessly give you the best LIFO results possible. We look forward to working with you!

CPA Firm LIFO Opportunities & Training Guide

Learn about LIFO opportunities abound for CPA firms, how to increase the scope of your LIFO offerings & learn how to easily identify good LIFO candidates!

Interim Estimate Options

Learn how to easily make interim LIFO estimates manually or within our software!

Non-disclosure Agreement Request Form

Get a NDA generated electronically in less than a minute using LIFO-PRO’s online request form page & avoid having to print, sign & scan a paper NDA!

IPIC LIFO Resources

Learn how the IPIC LIFO Method works, find valuable Bureau of Labor Statistics (BLS) links and stay up to date on all changes related to the IPIC Method!

LIFO Success Stories

Learn about LIFOPro’s past roles in partnering with companies & CPA firms to deliver great value by finding solutions to the most challenging LIFO issues!

IPIC LIFO Overview

The Inventory Price Index Computation (IPIC) method allows taxpayers to use published external indexes to calculate inflation for the purpose of valuing LIFO inventories.

Authoritative Guidance & LIFO Methods

Your comprehensive resource for authoritative LIFO guidance, LIFO election requirements, and method alternatives!

Supermarket Physical Count Procedures

Find helpful information on how IRS regulations effect grocery LIFO Count Procedures for CPI & PPI taxpayers on our Supermarket Count Procedures page.

Special Challenges for Supermarkets

Supermarkets face LIFO calculation issues unique to the industry. Find out why & answers to how they are dealt with Special Challenges for Supermarkets page.

Why the Double-extension LIFO Index Calculation Method is Unreliable

Facts describing why the double-extension LIFO index calculation method is unreliable and examples proving how this method creates unpredictable results.

LIFO Training & Audit Guide

The LIFO Inventory Training Basics & Audit Guide provides detailed LIFO calculation steps, LIFO documentation procedures, internal controls & audit best practices.

Addition of Services Table 9 Codes

Find recent important changes & BLS addition of Table 9 Wherever-provided Services & Construction PPI Indexes & Important Change in PPI Code Structure page.

CPI Category Updates

Find information on CPI Category Changes & Bureau of Labor Statistics Consumer Price Index update information such as new medical commodity codes here!

PPI Category Updates

Learn IRS Regulations Requirements for missing PPI Indexes, procedures for reassigning discontinued PPI Categories at LIFO-PRO’s PPI Category Changes page.

Producer Price Index Usage by Supermarkets to Increase Tax Deferral

Learn how drugs, non-foods & food/beverage indexes cause increase LIFO tax benefits at our PPI Index Usage by Supermarkets to Increase Tax Deferral page.

Consumer/Producer Price Index Inflation History

Get the most up to date Bureau of Labor Statistics Consumer & Producer Price Index inflation data from LIFOPro!

IPIC LIFO Advantages

Switching from the double-extension to link-chain method? Want to achieve higher possible inflation indexes? Learn more at the IPIC LIFO Advantages page.

LIFO Repeal Updates

Get the latest LIFO repeal updates including the latest news on corporate tax reform at LIFO-PRO’s LIFO Repeal Updates page.

Videos

LIFO-PRO Company Overview – Quick 1 minute video explaining LIFO-PRO’s service and software offerings.

Request Forms Page

Request a software trial, LIFO Election Benefit Analysis, Best LIFO Practices Methods Review or cost estimate. All of our requests are complimentary & free of obligation!

FAQ’s

View some of our frequently asked questions to learn more about LIFO

LIFO Glossary

Accounting and financial professionals who work with LIFO need to understand the jargon associated with LIFO. Below are a number of LIFO-related terms.

What Makes a Good LIFO Candidate?

Get answers to who should use the LIFO method, how much LIFO may benefit your company or client & good LIFO candidates by industry & principal business activity along with historical inflation data.

Why Use LIFO & How it Works

Hundreds of companies & CPA firms utilize our LIFO outsourcing solutions or the LIFO-PRO software for turnkey LIFO solutions.

Turnkey Outsourcing Solutions

IRS Annual LIFO Calculation Requirement & LIFO Conformity Rule (See IRS Regs. §472(c), §472-2(e) & §472-2(g))

IRS LIFO Books & Records Requirement (See IRS Regs. §472-2(h))

LIFOPro’s Responsibilities

CPA Firm or Client Responsibilities

LIFOPro Outsourcing Engagement Process Flow: First Year

Learn More or Get Started

Schedule a Call or Demo

Get a Complimentary Analysis, Review or Estimate

Non-disclosure Agreement

Get a Complimentary LIFO Election Benefit Analysis Today

Resources