Examples of changes in accounting methods that would require filing Form 3115, Application for Change in Accounting Method

Examples of changes in accounting methods that would require filing Form 3115, Application for Change in Accounting Method

1. **Depreciation Method**

Changing from straight-line depreciation to accelerated depreciation (e.g., switching from MACRS to ADS).

2. **Inventory Method**:

Switching from FIFO (First-In, First-Out) to LIFO (Last-In, First-Out) or vice versa.

3. **Revenue Recognition**:

Transitioning from recognizing revenue upon delivery to recognizing revenue upon completion of service.

4. **Cost Capitalization**:

Altering the criteria used to determine which costs should be capitalized as part of an asset.

5. **Accounting for Bad Debts**:

Moving from the direct write-off method to the allowance method for bad debts.

5. **Accounting for Bad Debts**:

Moving from the direct write-off method to the allowance method for bad debts.

6. **Treatment of Prepaid Expenses**:

Changing the method of amortizing prepaid expenses (e.g., from straight-line to usage-based).

7. **Lease Accounting**:

Transitioning from operating lease accounting to capital lease accounting or vice versa due to changes in lease terms.

These are just a few examples, and there are many other scenarios that could necessitate filing Form 3115 depending on the circumstances of a particular business. It's important for businesses to consult with their accountants or tax advisors when considering such changes to ensure compliance with tax regulations.

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