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The following table illustrates respondent’s adjustments with
respect to Nissan for 1997 through 1999 (all dollar figures in
thousands):
1997 1998 1999
LIFO inventory value as corrected $1,829 $1,848 $1,910
LIFO reserve as corrected (1,048) (1,032) (1,009)
Less: LIFO reserve as reported (1,843) (1,844) (1,862)
Equals: Adjustment to ending
inventory 795 812 853
Less: Adj. to beginning inventory 1441 795 812
Equals: Yearly adjustment to income 354 17 41
Cumulative Adjustment to income 795 812 854
1 Adjustment to 1996 ending inventory.
Respondent’s adjustment to ending inventory is a measure of
the improper net increase in cost of goods sold (and net reduction
in gross income) through the end of the year due to the
accountant’s error. It is, by definition, equal to the
accountant’s overstatement of the LIFO reserve as of that yearend
(which overstatement is a measure of the gain in the inventory pool
that should already have been recognized under the LIFO method).
In appendices attached to his brief, respondent calculates the
required adjustment to inventory for each member of the Huffman
group for each year for which he recalculated the member’s
inventories and, additionally, describes the required adjustment as
the “cumulative adjustment to income” for the year.
Petitioners agree that respondent’s calculations of the
beginning and ending inventories of each member of the Huffman
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