diff --git a/lib/utils/index.js b/lib/utils/index.js
index ab60de5..d296889 100644
--- a/lib/utils/index.js
+++ b/lib/utils/index.js
@@ -142,7 +142,7 @@ function normalize(uri) {
   return decodeURIComponent(uri.replace(/~1/g, '/').replace(/~0/g, '~'));
 }
 
-function descent(uri, parentSchema) {
+function descend(uri, parentSchema) {
   let uriFragment = fragment(uri);
   if (!uriFragment && isFullUri(uri)) {
     return parentSchema;
@@ -211,5 +211,5 @@ module.exports = {
   isFullUri,
   head,
   fragment,
-  descent,
+  descend,
 };
diff --git a/lib/utils/state.js b/lib/utils/state.js
index 5c9528d..4587fd5 100644
--- a/lib/utils/state.js
+++ b/lib/utils/state.js
@@ -1,7 +1,7 @@
 const { list: validators } = require('../validators');
 const { body, restore, template } = require('./template');
 const {
-  descent,
+  descend,
   makePath,
   head,
   isFullUri,
@@ -13,15 +13,25 @@ const {
 
 function State(schema = {}, env) {
   Object.assign(this, {
-    resolution: [0],
     context: [],
     entries: new Map(),
     env,
   });
-
-  this.push(schema);
 }
 
+/**
+ * @name generate
+ * @type {function}
+ * @description
+ * The main schema process function.
+ * Available and used both in external and internal generation.
+ * Saves the state for internal recursive calls.
+ * @param {object} env - djv environment
+ * @param {object} schema - to process
+ * @param {State} state - saved state
+ * @param {Environment} options
+ * @returns {function} restoredFunction
+ */
 function generate(env, schema, state = new State(schema, env), options) {
   const tpl = template(state, options);
   tpl.visit(schema);
@@ -31,7 +41,6 @@ function generate(env, schema, state = new State(schema, env), options) {
 }
 
 State.prototype = Object.assign(Object.create(Array.prototype), {
-  // template related methods
   /**
    * @name addEntry
    * @type {function}
@@ -39,48 +48,43 @@ State.prototype = Object.assign(Object.create(Array.prototype), {
    * Generates an internal function.
    * Usually necessary for `allOf` types of validators.
    * Caches generated functions by schema object key.
+   * Checks for an existing schema in a context stack to avoid double parsing and generation.
    * @param {string} url
    * @param {object} schema
    * @returns {number/boolean} index
    */
   addEntry(url, schema) {
-    if (!isSchema(schema)) {
-      return schema;
+    let entry = this.entries.get(schema);
+    if (entry === false) {
+      // has already been added to process queue
+      // will be revealed as an entry
+      return this.context.push(schema);
     }
 
-    const options = { inner: true };
-    const entry = this.entries.get(schema) || generate(this.env, schema, this, options);
-    this.entries.set(schema, entry);
-    this.revealReference(url);
+    if (typeof entry === 'undefined') {
+      // start to process schema
+      this.entries.set(schema, false);
+      entry = generate(this.env, schema, this, { inner: true });
+      this.entries.set(schema, entry);
+      this.revealReference(schema);
+    }
 
     return this.context.push(entry);
   },
   /**
-   * @name addReference
+   * @name revealReference
    * @type {function}
    * @description
-   * Checks for an existing schema in a context stack to avoid double parsing and generation.
-   * @param {string} url
+   * If a schema was added during the add entry phase
+   * Then it should be revealed in this step
    * @param {object} schema
-   * @returns {number/boolean} index
+   * @returns {void}
    */
-  addReference(url, schema) {
-    const schemaIndex = this.indexOf(schema);
-    // reference to itself
-    if (schemaIndex === 0) {
-      return this.context.push(0);
-    }
-    if (schemaIndex !== -1 && schemaIndex !== this.length - 1) {
-      // has already been added to process queue
-      return this.context.push(url);
-    }
-    return false;
-  },
-  revealReference(url) {
+  revealReference(schema) {
     for (
-      let doubled = this.context.indexOf(url);
+      let doubled = this.context.indexOf(schema);
       doubled !== -1;
-      doubled = this.context.indexOf(url)
+      doubled = this.context.indexOf(schema)
     ) {
       this.context[doubled] = this.context.length;
     }
@@ -89,53 +93,15 @@ State.prototype = Object.assign(Object.create(Array.prototype), {
    * @name link
    * @type {function}
    * @description
-   * Resolves schema by given url and current registered context stack.
-   * Returns an entry's index of in a context stack.
+   * Returns an entry's index in a context stack.
    * @param {string} url
    * @returns {string} entry
    */
   link(url) {
     const schema = this.resolve(url);
-    const entry = this.addReference(url, schema) || this.addEntry(url, schema);
-
+    const entry = this.addEntry(url, schema);
     return entry;
   },
-  // pure scope resolution methods
-  push(schema) {
-    // if schema id is partial
-    // it should be resolved against the closest parent(s)
-    // so only valid URIs added to resolution
-    if (schema && schema.id && this.length && isFullUri(schema.id)) {
-      this.resolution.push(this.length);
-    }
-
-    Array.prototype.push.call(this, schema);
-  },
-  getResolvedSchema(path) {
-    if (hasProperty(this.env.resolved, path)) {
-      return this.env.resolved[path].schema;
-    }
-
-    const cleanPath = cleanId(path);
-    if (hasProperty(this.env.resolved, cleanPath)) {
-      return this.env.resolved[cleanPath].schema;
-    }
-
-    if (cleanPath) {
-      const foundResolvedIndex = this.resolution
-        .reverse()
-        .find(index => this[index].id && (
-          this[index].id === cleanPath ||
-          this[index].id === path
-        ));
-
-      if (typeof foundResolvedIndex !== 'undefined') {
-        return this[foundResolvedIndex];
-      }
-    }
-
-    return null;
-  },
   /**
    * @name ascend
    * @type {function}
@@ -146,47 +112,40 @@ State.prototype = Object.assign(Object.create(Array.prototype), {
    * @returns {object} parentSchema
    */
   ascend(reference) {
-    const indexOfParent = Math.max(this.resolution[this.resolution.length - 1], 1);
-
-    let parentSchemaPath = head(reference);
-    let parentSchema = this[indexOfParent];
-
-    if (parentSchemaPath && this.length > 1 && !isFullUri(reference)) {
-      parentSchemaPath = makePath(
-        this.slice(indexOfParent)
-          .map(({ id }) => id)
-          .concat(parentSchemaPath)
-      );
+    const path = head(reference);
+    // already saved by resolved id
+    if (hasProperty(this.env.resolved, path)) {
+      const resolvedWithEnvironment = this.env.resolved[path];
+      return resolvedWithEnvironment.schema;
     }
 
-    const resolvedSchema = this.getResolvedSchema(parentSchemaPath);
-    if (!parentSchema || resolvedSchema) {
-      parentSchema = resolvedSchema;
-    }
+    // search in a backward order for the last "resolution" schema
+    // TODO refactor reverse, slice on every call
+    const parentSchema = this
+      .slice()
+      .reverse()
+      .find(({ id }) => id)
+      || this[0];
 
-    // try to resolve it against environment
-    if (hasProperty(parentSchema, '$ref')) {
-      const ref = head(parentSchema.$ref);
-      if (ref !== '#' && this.getResolvedSchema(ref)) {
-        parentSchema = this.getResolvedSchema(ref);
-      }
-    }
-
-    this.push(parentSchema);
     return parentSchema;
   },
+  /**
+   * @name resolve
+   * @type {function}
+   * @description
+   * Resolves schema by given reference and current registered context stack.
+   * @param {string} url
+   * @returns {object} schema
+   */
   resolve(reference) {
-    if (reference === '#') {
-      return 0;
-    }
     if (typeof reference !== 'string') {
       return reference;
     }
 
-    const parent = this.ascend(reference);
-    const resolved = descent(reference, parent);
+    const parentSchema = this.ascend(reference);
+    const subSchema = descend(reference, parentSchema);
 
-    return resolved;
+    return subSchema;
   },
   /**
    * @name visit
@@ -199,18 +158,12 @@ State.prototype = Object.assign(Object.create(Array.prototype), {
    * @returns {void}
    */
   visit(pseudoSchema, tpl) {
-    const initialStateLength = this.length;
-    const initialResolutionLength = this.resolution.length;
-
     const schema = transformSchema(pseudoSchema);
     this.push(schema);
 
     validators.forEach((validator) => {
       validator(schema, tpl);
     });
-
-    this.length = initialStateLength;
-    this.resolution.length = initialResolutionLength;
   },
 });
 
diff --git a/lib/utils/template.js b/lib/utils/template.js
index abf4237..0bada4a 100644
--- a/lib/utils/template.js
+++ b/lib/utils/template.js
@@ -158,7 +158,7 @@ function body(tpl, state, { inner, errorHandler } = {}) {
     state.context
       .forEach((value, i) => {
         if (typeof value === 'number') {
-          references.push(`${i + 1}=f${value}`);
+          references.push(`${i + 1}=f${value + 1}`);
           return;
         }
         functions.push(`${i + 1}=${value}`);