Rev. Rul. 73-66

Advice has been requested whether a taxpayer that has elected to adopt and use the last-in, first-out (LIFO) inventory method as provided in section 472 of the Internal Revenue Code of 1954 may report the value of its inventories in the manner indicated below, without violating the procedural requirements of subsections (c) and (e) of section 472 of the Code.

The taxpayer proposes to use as a notation on its balance sheet included in its annual reports, with respect to its inventories and the inventories of its subsidiaries using the LIFO inventory method, a footnote or parenthetical statement in language substantially as follows:

"If the first-in, first-out (FIFO) method of inventory accounting had been used by the company, inventories would have been $_____ and $_____ higher than reported at December 31, 19 , and December 31, 19 , respectively."

In all other respects in the annual reports and for all other financial statement purposes, including income statements, balance sheets, and reporting of earnings per share, the taxpayer will use only the LIFO inventory method. No further explanatory statements with respect to inventories will be made on the taxpayer's statements and reports.

With respect to reports to shareholders, partners, or other proprietors, or to beneficiaries, or for credit purposes, section 472(c) of the Code requires that no procedure other than the LIFO procedure be used in inventorying goods to ascertain the income, profit or loss of the first taxable year it uses the LIFO method for Federal income tax purposes. Section 472(e)(2) of the Code imposes the same requirement for subsequent taxable years, and authorizes the Secretary or his delegate to require the taxpayer to change to another method of inventory identification and valuation when this requirement is not complied with.

Accordingly, under the facts presented, it is held that the proposed footnote or parenthetical statement to the balance sheet may be used without violating the requirement of subsections 472(c) and (e) of the Code.

¹ Also released as Technical Information Release 1225, dated January 9, 1973.