Washington Tax Alert – June 25, 2008 – Rolling average inventory method

Washington Tax Alert from Don Barnes, [email protected]
June 25, 2008

The Service issued a revenue procedure this afternoon acquiescing in the use of a rolling average method for determining the cost of inventory ( see Rev. Proc. 2008-43). This represents a reversal of the Service’s prior position on this issue. Under the new revenue procedure, the Service will generally treat a rolling average method used by a taxpayer to value inventories for financial statement purposes as clearly reflecting income for Federal income tax purposes.

A taxpayer’s rolling average method will be deemed to clearly reflect income if the rolling average is recomputed each time an item of inventory is acquired or produced, or no less frequently than once a month, and the taxpayer’s entire inventory turns at least four times per year.