USE OF ESTIMATES OF SHRINKAGE FOR INVENTORY ACCOUNTING.

SEC. 961. USE OF ESTIMATES OF SHRINKAGE FOR INVENTORY ACCOUNTING. (a) In General.—Section 471 (relating to general rule for inventories) is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection: “(b) Estimates of Inventory Shrinkage Permitted.—A method of determining inventories shall not be treated as failing to clearly reflect income solely because it utilizes estimates of inventory shrinkage that are confirmed by a physical count only after the last day of the taxable year if— “(1) the taxpayer normally does a physical count of inventories at each location on a regular and consistent basis, and “(2) the taxpayer makes proper adjustments to such inventories and to its estimating methods to the extent such estimates are greater than or less than the actual shrinkage.”. (b) Effective Date.— (1) In general.—The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act. (2) Coordination with section 481.—In the case of any taxpayer permitted by this section to change its method of accounting to a permissible method for any taxable year— (A) such changes shall be treated as initiated by the taxpayer, (B) such changes shall be treated as made with the consent of the Secretary of the Treasury, and (C) the period for taking into account the adjustments under section 481 by reason of such change shall be 4 years.