LIFO Inventory valuation module - any interest?

Hi Jonathan,

With the high rate of inflation these days, I expect a number of Acumatica customers and prospective customers to be asking for LIFO more and more in the future.

Best,

David Eichner, CPA

Thanks @DavidEichner. This is one of those esoteric accounting concepts to which many people just never get practical exposure.

As long as the ERP system can do FIFO accounting, it can comply with the guidelines for computing LIFO per the IRS standards. I believe there is also a way to do it using average cost.

The LIFO calculation tends to be a once a year thing, so that’s maybe also why there isn’t that much software to handle it. However, there is a niche that can be filled to automate these calculations, and also calculate the LIFO Reserve throughout the year in order to give visibility to management to end of year tax implications.

I’ll check back in down the road when we look at building a tool to handle this.

this comes up all the time with Contractors and any construction clients using inventory. We’ve lost sales because the software does not support LIFO. 

@jsheehan56 I think one developer could probably build this feature in 3-6 months. It requires adding two custom fields…. LIFO Base Year and Base Year Cost on a per item basis, and then doing some basic math on the data that is already in the system. It’s really not that complicated from a software perspective, but like I said it’s esoteric accounting so there aren’t that many people out there that understand both the accounting and the software side.

@rosenjon  Agreed.  I thought about writing something for LIFO but I was thinking that it would be too complicated to create and manage LIFO layers as opposed to FIFO layers.

@DavidEichner Yeah, as far as I know, that’s not really a thing. I guess it’s possible there is software that stores data as LIFO layers, but I have never come across it. LIFO is a tax treatment, and not much more. It involves some funny math that I don’t think is all that useful from a management reporting perspective (except to plan around the tax implications of the LIFO reserve).

The IRS recommends the Double Extension method for LIFO. It is calculated by tracking the Base Year and Base Year Cost for each item. So these are the custom fields you would have to track for each item in the system (or a sample set of items...which is also valid under certain LIFO methodologies).

See here for detailed explainer: Introduction to Dollar Value LIFO (irs.gov)

The rest is just data you would find in a regular ERP which tracks by FIFO or Avg cost, depending on which LIFO calculation method you use.

@rosenjon  Believe it or not, Dynamics GP had the choice of FIFO, LIFO or Average Cost.  In GP, it had layers like FIFO but it used them Last In First Out (LIFO).

Best,

David Eichner, CPA

 We are facing challenges in generating a report that presents this particular information. The Last-In-First-Out (LIFO) method holds significant importance for us, as it directly affects our tax credits in a substantial manner. 

@ppaff If you want help. you will probably have to elaborate beyond “facing challenges”. What specific problems are you encountering?

if you follow the dollar value LIFO method I linked to above on the IRS site, you will need to have custom fields for Base Year Cost and Base Year for each item you track (you are allowed to have a representative item index to track dollar value LIFO, as opposed to calculating for every item...see the doc).

Everything else is calculable using standard FIFO inventory (which Acumatica supports).

Whether you use dollar value LIFO or not is a question of the industry your client is working in.

Anything new on the LIFO front.  We have a client that wants LIFO.