Best LIFO Practices Methods Review Report

Most corporate accounting and financial reporting executives have a limited amount of time to thoroughly examine their companies book and tax LIFO methods due to time constraints and a lack of LIFO expertise. Most CPA firms lack the ability to maximize tax LIFO benefits for their clientele due to lacking LIFO experience and being focused solely on LIFO compliance. The issues listed above place many companies at risk for experiencing financial reporting compliance issues, IRS audit exposure, and marginal tax LIFO benefits being achieved.

Lee Richardson (CPA, company founder & LIFO-PRO software developer) is the leading non-auto dealer LIFO practitioner and has over 70,000 hours of LIFO experience. Lee is the only practicing C.P.A. who provided written and oral testimony to the IRS during the new IPIC LIFO Regs. drafting period in 2000. He worked with the Big 4 CPA firms to ensure certain provisions of the preliminary Regs. were changed in the final Regs. This included the retention of the optional 10% method rules (major time saver for taxpayers) & the ability for retailers to use CPI or PPI indexes. Lee has authored many different LIFO training and reference guides including the LIFO Inventory Training Basics & Audit Guide, which was written in 2015.

Literature for achieving practicable, beneficial and compliant LIFO calculations have been excluded from the IRS Regulations and U.S. Treasury Codes that pertain to LIFO. The instruction provided within the tax code is extremely subjective, convoluted and often unclear. Our 25+ years of dealing exclusively with LIFO has allowed our team to capture valuable LIFO knowledge. Our team has collaborated with the IRS to gain the knowledge necessary to become proficient in tax LIFO reporting standards. We’ve teamed with individuals and organizations that are involved with oversight of the FASB Conceptual Framework that relates to LIFO to achieve a mastery level of training in book LIFO financial reporting compliance and GAAP

LIFO Best Practices Methods Review Report Content

  • GAAP Book financial reporting compliance – compares book LIFO methods against tax methods to ensure LIFO conformity rules are being followed, identifies potential errors that exist in book reporting procedures, and ensures that all LIFO methods adhere to Generally Accepted Accounting Principles
  • Tax LIFO benefit maximization- Examines tax LIFO inflation measurement source, compares current measurement sources tax benefits against alternative measurement methods, and provides evaluation to identify the inflation measurement source that maximizes LIFO tax benefits
  • Best LIFO practices- reviews LIFO methods, reporting, LIFO Layer History maintenance procedures & verification that practical, efficient LIFO methods are being used
  • IRS Tax reporting compliance- Evaluates tax LIFO methods to ensure the LIFO elections, scope, pooling & inflation measurement conform to § 1.472 IRS LIFO Regulations

Benefits of Receiving a LIFO Best Practices Methods Review Report

  • Ensure LIFO methods meet GAAP financial reporting standards
  • Pro forma review on tax LIFO benefit maximization
  • Identify potential LIFO calculation errors
  • Identifies potential IRS audit exposure risk
  • Advice for dealing with compliance issues
  • Recommendations for obtaining maximum tax LIFO benefits
  • Guidance on eliminating IRS audit exposure
  • Assistance with improving LIFO internal controls

How It Works

  1. A Best LIFO Practices Methods Review Report Request is completed to gather the following:
    1. LIFO inventory information (i.e. Business type, year-end, LIFO election scope, etc.)
    2. Book  & Tax LIFO Methods (i.e. Inflation comparison methods, pooling methods, inflation measure sources, etc.)
    3. IPIC Reporting Methods- if applicable  (i.e. 10% method usage, representative appropriate month, index types, etc.)
    4. LIFO-PRO reviews the submitted information
    5. LIFO-PRO determines if Best LIFO Practices are being used by using factors that include:
      1. Book & tax LIFO reporting Methods compliance (GAAP, AICPA, SEC, IRS, etc.)
      2. Best LIFO practices (takes company’s industry/inventory type into account to compare its methods against the most predominant practices used within that industry)
      3. Tax LIFO benefit maximization (projections performed using alternative inflation measurement sources; tax benefits of current method compared against alternatives)
    6. LIFO-PRO aggregates information to create a summary report that includes the findings of the review
    7. LIFO-PRO emails completed report to recipient within one business day of receiving request

Request a Best LIFO Practices Methods Review Report