This article presents an analysis of the provisions of the "Accounting for Retail Land Sales" guide, published by the a committee on land development companies, established by the American Institute of Certified Public Accountants (AICPA). This committee was established when the problems of accounting for land development companies began to receive considerable attention in financial publications and in non-accounting journals. The AICPA committee presented an exposure draft which required, among other things, that land subdivision companies postpone recognition of revenue from installment contracts until at least a 10% down payment was collected and that a company's collection experience met certain requirements. The guide provides for a modified accrual method to be used if certain conditions are met. Otherwise the installment sales method should be employed. The identifying characteristic of the land development company is the acquisition of large tracts of unimproved land for subdivision into lots for sale to widely dispersed retail customers through intensive marketing programs.

The article discusses the price level changes, inventory valuation and tax consideration. This article attempts to illustrate the differing tax liabilities which result from various combinations of inventory valuation method, rate of price change, turnover rate, and markup rate during a broad range of historically based inflationary and business cycle price movements. Differences in cost of goods sold become differences in profit before tax figures. The greater the size of the price movement, the greater the differences that will result from the use of alternative inventory valuation methods. The application of the Fifo method results in higher tax liabilities than the amplication of Lifo, both for the total period and for each individual year of the period, because prices rise throughout each case. All major variables and the manner in which they combine must be considered before judgment can be made on the significance of differences in tax liabilities resulting through the use of alternative inventory valuation methods. Differences in tax liabilities which result from alternative inventory methods follow variances in profit figures. In those situations in which profit figures are significantly different, variances in tax liabilities produced by alternative methods are important.

Reviews two books. "Accounting Trends and Techniques in Published Corporate Annual Reports," 15th ed.; "Financial Reporting in Canada," 4th ed.