Corporate Headquarters
6000 Western Place, Ste 800
Fort Worth, TX 76107
817.732.5494

Regional Business Development Contacts:

Texas Gulf Coast Region:
Candace Willingham

Midwest Region:
Diane Smith

Northeast Region:
Jennifer Weston

Southeast Region:
David DeGrand

South Central Region:
Jennifer Chin

Pacific Northwest Region:
Laura Collins

Upper Midwest Region:
Al Schmitt

A Glossary of LIFO Terminology

cumulative index - the measure of inflation from the first day of the LIFO election to the current year. It is computed by multiplying all annual LIFO indexes together. For example, the cumulative index for a taxpayer on LIFO for five years would be computed by multiplying each year's index as follows: Year 1 x Year 2 x Year 3 x Year 4 x Year 5. The cumulative index is often the same number as the inflation index.

cumulative LIFO reserve - the total LIFO reserve accumulated from the first day of the first year on LIFO until the end of the current year. This number should grow every year.

decrement - occurs when there is a current-year decrease in inventory at base cost compared to the previous year.

increment - occurs when there is a current-year increase in inventory at base cost compared to the previous year.

inflation index - the index that was used to "inflate" the inventory value at base cost to its LIFO cost as of the year it was created. For example, if the base year was 1985 and the layer you are entering is from 1993, the inflation index is the one which was used to inflate the layer from its 1985 base cost to its 1993 LIFO value. In most years, the Inflation Index is the same as the Cumulative Index.

inventory value at base cost - what the inventory would have cost on the first day of the year LIFO was elected. If the dealership elected LIFO for the first time effective 12/31/85, the inventory value at base cost would be expressed in 01/01/85 dollars.

LIFO layer - If an increment occurs during a year, the amount of the increment constitutes a layer. Each year an increment occurs, a separate layer is formed. When a decrement occurs after a layer or layers have been created, there is a liquidation of some or all of the layers.