Accounting methods -- Adoption and change;

              Accounting Methods—Adoption and Change
by T. MILTON KUPFER. Partner, Executive Office
Presented at the Mid-America Tax Conference sponsored by the Saint Louis Chapter of the Missouri Society of Certified Public Accountants, Saint Louis—November 1966
WE OFTEN HAVE OCCASION to suggest the desirability of adopting or changing established accounting practices. This frequently hap­pens
in the initial examinations of financial statements of new clients but can also arise in our tax-planning work with present clients or when changes in conditions make such a recommendation advisable.
In many cases, the suggested changes would have the effect of sub­stantial
increases in taxable income if they were made for tax account­ing
as well as for financial accounting purposes. Before we suggest changes in accounting, or before we approve changes suggested by the client, it is important that we be cognizant of tax effects of the changes and of the ways in which tax increases might be avoided or held to a minimum.
The purposes of my discussion today are:
First, to discuss some of the tax implications of changes in account­ing
methods.
Second, to indicate what your clients should do to secure desirable changes and also what they can do to resist undesirable changes initiated by the Commissioner.
Third, to consider some specific tax-planning opportunities in adopting and changing accounting methods.
FIRST—WHAT IS A CHANGE IN ACCOUNTING METHOD?
As you are probably aware, much uncertainty concerning tax re­sults
has stemmed from an inability to produce a solution to the problem of determining just what an accounting method is.
Before going into the definitional problem perhaps we should set it in perspective by answering the question, "Why is it important that we determine whether the item we are dealing with has the dignity of being an accounting method?"
The tax consequences of any change in accounting procedure de­pend
to a large extent on whether the change is deemed to be a change in accounting method or merely a correction of an erroneous accounting treatment. Most changes of accounting method require the prior ap­proval
of the Service and, therefore, give the Service rather broad au-
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