Financial statement conformity no longer required in change in accounting method consent letter.

Until recently, the IRS National Office, in consenting to a taxpayer's request to change from one proper method of accounting to another, imposed as a condition to its consent that the taxpayer use the new accounting method for financial statement reporting purposes. This National Office policy discouraged clients for changing to a more advantageous method of accounting for tax purposes because the new method was not advantageous for financial statement reporting purposes. Thus, a retailer using the cost or lower of cost or market valuation method for both tax and financial statement reporting purposes was disinclined to request to change to the retail method for tax purposes because the retailer did not want to use the retail method for financial statement reporting purposes.

With the exception of changes involving the deferral of advance payments for goods and services, the Service is no longer imposing a financial statement conformity condition on proper to proper changes in accounting method. The IRS is merely imposing a year-end reconciliation requirement. Thus, clients should be advised of the opportunity to change to a more tax advantageous method of accounting that will not result in adverse financial statement reporting consequences.