Replacement Cost Method for Valuing Vehicle Parts inventory
11/19/2018 Tags: Announcements, In the News
There is an important tax accounting development that could reduce your recordkeeping and accounting burdens. As you may be aware, many automobile dealers value their inventories of auto parts at the amount it would cost to buy replacement parts rather than at “actual cost.” What you may not know is the IRS had, in the past, successfully challenged this method on audit. Nonetheless, the IRS decided to bow to industry practice and permit automobile dealers to use replacement cost to value inventory as long as they meet the following requirements:
- Dealers must use a “standard price list” to determine replacement cost.
- The method must be used consistently for all financial accounting purposes.
If you already use the replacement cost method, you need do nothing in order to continue, apart from ensuring that you are complying with IRS's requirements. If you are not already using the replacement cost method and would like to change, you must file a form that permits an automatic change of accounting method.
Whether or not you want to change your accounting method, the professionals at Casey Peterson, Ltd. can help you be certain you are in full compliance with the IRS rules.
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