LIFO Financial Reporting Disclosure Requirements & Alternatives

What Rules Exist Regarding LIFO Disclosures for Financial Reporting Purposes? The IRS tax law commonly referred to as the “LIFO conformity rule” is the authoritative guidance that prescribes the financial report and statement requirements for companies that use the LIFO method (assuming financial reports or statements are issued to external parties; these rules are not […]

Why Companies Use Different Book & Tax LIFO Methods

What is the LIFO Conformity Rule? IRS Reg. §1.472-2(e)(1) requires for taxpayers using the LIFO method to also do so for financial reporting purposes beginning in the year that LIFO is adopted for tax purposes (LIFO can be adopted for financial reporting purposes prior to the adoption for tax purposes, but not vice versa). What […]

How the IPIC Method Could Maximize Your LIFO Reserve

What is the IPIC Method? Dollar-value LIFO method users are allowed to use an internal or external inflation measurement source to calculate inflation. Here’s an overview of these two methods: Internal indexes Current period’s quantities are double extended against current & prior period unit costs (prior period unit costs are used if the link-chain method […]

Record Number of Companies Electing LIFO

What has Caused the Surge in First-time LIFO Elections? LIFOPro has seen a nearly 40% increase in first-time LIFO elections amongst new clients between 2021 – 2022. The primary cause of this record number of companies electing LIFO has been the highest inflation seen in 40 years over the last two years, which translated into […]

When the Use of a LIFO Specialist May be the Best Choice for Your Client

When I worked at Touche Ross many years ago, the idea that another CPA or professional would be a better choice to provide specialized accounting services for one of our clients would have been just about unthinkable. Things have changed a lot over the years and the use of outside service providers for accounting services […]

LIFO Election Essentials

LIFOPro’s LIFO Election Essentials What are the advantages of LIFO? It will reduce taxable income whenever there’s inflation (unless material inventory liquidation occurs) Most companies remain on LIFO once they elect because the benefits will continue to accrue & there’s no limit on how long you stay on LIFO or cap on the size of […]

LIFO Conformity for Foreign-Controlled Consolidated Groups with U.S. Subsidiaries

IRS Revenue Ruling 78-246 provides an exception to the LIFO conformity rule for foreign-controlled consolidated groups. The use of a non-LIFO method of calculating income, profit and loss in the consolidated statements of a foreign-controlled consolidated group even when one or more of the subsidiaries uses LIFO for U.S. income tax reporting is not in […]

Top 10 LIFO Election Locks of 2022

Exploring electing LIFO in 2022 is essential in certain industries because it’d be irresponsible to fail to do so. The inflation experienced in many industries this year will may never occur again in our lifetimes. In many cases, the benefits from electing LIFO in 2022 will create tax benefits that would normally take many years […]

Tax Relief in Sight for Dealerships Suffering LIFO Recapture in 2020 – 2021

What is the Supply Chain Disruptions Relief Act? This bill was drafted to provide tax relief to new motor vehicle dealerships using the LIFO method who had qualified inventory liquidations solely attributable to supply chain disruptions that occurred between 2020 – 2021, which in turn caused LIFO recapture & increased tax liabilities to be recognized […]

How LIFO Works: A Beginner’s Guide to LIFO

Download PDF Guide Why Use LIFO? Tax Benefits LIFO often creates material long-term tax deferral/savings: Not just a one-time tax benefit or timing difference between book & tax such as straight-line vs. accelerated depreciation During periods of rising costs, LIFO: Provides more after-tax free cash flow than non-LIFO methods when there’s inflation Ensures taxes aren’t […]

2022 Auto Dealer IPIC LIFO Case Study

Download PDF Guide Auto Dealer LIFO Submethods Comparisons Alternative LIFO method (ALM): Measures inflation based on comparing current & prior period’s invoice costs; Item definition is specific to each vehicle/VIN, meaning inflation must be calculated for each vehicle, not just by make or type (car, truck, SUV) Pros Historically created more inflation & tax deferral […]

Election Requirements & Method Alternatives

Although LIFO is the biggest inventory-related tax savings tool for companies with inflation, it’s important to understand the requirements & sub methodology options available related to LIFO elections. This blog outlines the most important LIFO election requirements, provides a comprehensive list of LIFO method alternatives & breaks down the pros & cons of each alternative. […]