She previously worked in public accounting and for several corporations. She has published numerous articles in taa journals. n August 1997, the Internal Revenue Service issued five new procedures (Revenue Procedures 97-35 through 97-39) and new I final regulations (relating to uniform capitalization rules) giving taxpayers long-awaited guidance on making changes in accounting methods. The most widely anticipated of these pronouncements is Revenue Procedure 97-37, which provides uniform global procedures for obtaining IRS consent for automatic accounting method changes.
WHAT I S CONSIDERED A CHANGE IN ACCOUNTING METHOD?
Section 446(e) states that, except as otherwise provided, a taxpayer must secure the consent of IRS before changing a method of accounting for federal income tax purposes. The related regulations require that, in order to obtain IRS consent to a method change, the taxpayer must file a Form 3115 (Application for Change in Accounting Method) during the taxable year in which the taxpayer wants to make the proposed change.
The term "accounting method" encompasses not only the overall accounting method used by the taxpayer, but also the treatment of any urnaterial" item of income or deduction. For financial accounting purposes, materiality is concerned with whether amounts are of significance to influence decisions regarding the financial statements. Thus, materiality is thought of as a dollar amount or as a percentage of some aspect of the financial statements. This idea of materiality for financial reporting differs from the concept of materiality to the IRS, which takes the view that something is material if it affects the proper time to recognize an item.
An example of an accounting method is a taxpayer's sales accrual policy, which determines the appropriate time to recognize revenue from the sale ofmerchandise. Similarly, inventory methods are generally