A method for temporal decomposition and reconstruction of an input video signal is disclosed. The method can use a prediction process and an update process in the framework of motion compensated temporal filtering (MCTF), the method can employ a block based video codec having an encoder and a decoder. A residual picture signal and a low-pass picture signal are received, the low-pass picture signal having a lesser precision than that of the residual picture signal, and in response to the residual picture signal being decoded in the decoder, the residual picture signal is clipped and reduced in precision, such that the low-pass picture signal, a reconstructed picture, and the residual picture signal have equal precisions. An inverse MCTF process, using a lifting scheme, can be performed on the clipped residual signal.