Income Effects of Changing the Way for Which Dealer Discounts/Other Invoice Assesments are Accounted

How Does a Dealership Change the Way It Accounts for Dealer Discounts/Other Invoice Assesments?

Form 3115 — Change of Accounting Method
- Volume-Related Trade Discounts filed under Rev. Proc. 2002-9
- Invoice Ad Fees and Reimbursed Invoice Assessments filed under Rev. Proc. 97-27

Resulting Negative 481(a) Adjustment
- Rev. Proc. 2002-19 provides the adjustment to be taken in one year versus over a period of four

Dealerships on LIFO
- Layers must be converted to account for the netting of the discounts (§263A-7 outlines the methodology for revaluing LIFO inventory as a result of an accounting change.)

Ongoing Accounting of Dealer Discounts/Other Invoice Assessments
- Change for Book and Tax – Daily
- Change for Book and Tax – Year End Adjustment (Requires conversion at YE and reversal at YB)
- Change for Tax Only (Requires a bifurcation of book and tax for LIFO)

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