This course examines the tax reporting associated with the presence of inventories. It identifies when inventories must be maintained and the costs, including uniform capitalization costs that are inventoriable. Methods of valuation, including simplified methods are discussed in the context of both the FIFO and LIFO flow-of-costs methods.

Major Topics:

  • Understanding the differences between GAAP inventory and tax inventory
  • Methods of valuation of inventory: recordkeeping, changes in methods, impermissible methods
  • Dealing with subnormal goods, abnormal goods, excess stock, and valuation below cost 
  • Uniform capitalization of inventory
  • Understanding LIFO and its various variations, including specific goods, and an in-depth discussion of dollar-value LIFO

Learning Objectives:

  • Explain when inventories are required
  • Discuss when accrual accounting is required and when such accounting is permitted
  • Identify when inventories need not be maintained where there is income-producing merchandise
  • Explain the methods of determining inventoriable costs under FIFO
  • Describe simplified methods available to resellers and manufacturers
  • Identify inventoriable costs when the uniform capitalization rules apply
  • Distinguish direct and indirect costs, including service costs
  • Allocate service costs in mixed-service situations
  • Discuss the simplified production method and simplified retail method
  • Describe LIFO and distinguish it from FIFO method
  • Identify the requirements to adopt LIFO
  • Apply LIFO for simplified production method and the simplified resale method

Designed For: CPAs who have clients with businesses that carry merchandise
Level of Knowledge: Basic
Prerequisite: None
Advanced Preparation: None
Credits: 8