Alternative LIFO Method for Car Dealers

Document Type



Published by the National Society of Accountants in the National Public Accountant, volume 38 issue 3, 1993. Bryant users may access this article here.


National Society of Public Accountants

Publication Source

National Public Accountant


The dollar-value LIFO method ignores individual inventory items because it groups these items into one or more pools. The pools contain product categories so, for example, new cars could form one pool and new trucks could form another pool. With regard to how many pools should exist when a car dealer has cars with regular brakes, disc brakes, and anti-lock brakes, the IRS said 3 pools while dealers said one. There are tax advantages to having fewer, larger pools. In Rev. Proc. 92-79, the IRS relaxed its position and adopted definite, objective guidelines for organizing pools. These guidelines consist of manufacturer's base model codes. The codes are so broad and general that they allow one pool to encompass cars with regular brakes, disc brakes, and anti-lock brakes. The new alternative LIFO method of Rev. Proc. 92-79 allows dealers to adopt more natural business pools for new cars and light trucks.