Inventory Valuation Method Essay

Cost of inventory is determined using the average method; inventory is stated at the lower of cost or market. +pB13

The FASB ASC 330 Inventory provides primary authoritative guidance for the accounting for inventory. The predecessor literature is Accounting Research Bulletins (ARB) No.43 Chapter 4, paragraph 4 (Issued June, 1953) and Statement of Financial Accounting Standard (FAS) NO.151 Inventory cost- an amendment of ARB No.43, Chapter 4 (Issued November, 2004).

330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.

When calculating the percentage change in inventories, an issue arises when using either the lower cost of market or the market value. When looking at the calculations for finished goods inventory (insulated wire) and copper rod inventory Laramie has applied the lower cost of market. However, the calculation pertaining to plastics inventory reveals that the market value should be used for classification, but Laramie has used cost. The percentage change of the plastics inventory if the $.12 per pound is used is a 27% decrease. The importance of classifying inventory correctly

I would discuss with the supervisor and coworkers about how much percentage of the inventory should be valuated so that auditors can conclude that the inventory has no material discrepancies. And also, I will negotiate with the client in order to have a little more time to finish required valuation of inventory. Since I believe that providing unqualified and faithfully represented financial reports is an essential mission of an accounting firm, and that the investors and governmental authority consider CPAs and auditors should be responsible for the quality of financial reports (the punishment is quite harsh for not doing a good job), I would intend to sacrifice more time and costs for more accurate financial information.

Inventories are stated at the lower of cost or market. The method of determining cost for each subsidiary varies among LIFO, FIFO, and average cost.

2.2 Inventories (AASB 1019) as a general principle, inventories are valued at the lower of cost (including fixed and variable factory overheads where applicable) and net realizable value. Cost is determined on the basis of first-in-first-out, average or standard, whichever is the most appropriate in each case.

There are four accepted inventory methods: Specific Unit Cost, Average Cost, FIFO, and LIFO. Unique inventory items are recorded in inventory by the cost of that unit or specific unit cost. Non-unique items use one of the other 3 methods. The average-cost method is: average cost = cost of goods available / number of units available. The first-in, first-out (FIFO) method assigns the first costs into inventory to the first cost of goods sold. The last-in, first-out (LIFO) method assigns the last costs into inventory to the first cost of goods sold. Since inventory costs can vary, companies may choose an inventory method based on tax advantages. When prices are falling, FIFO will have the lowest taxable income. When prices are rising, LIFO has the lowest taxable

35-1 A departure from the cost basis of pricing the inventory is required when the utility of the goods is no longer as great as their cost. Where there is evidence that the utility of goods, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, the difference shall be recognized as a loss of the current period. This is generally accomplished by stating such goods at a lower level commonly designated as market.

b. The inventory write down recorded, as an expense by the company is $4.4 million. It is measured at lower of cost and net realizable value. Cost is measured by weighted average using standard cost method or

Customers may lose interest in objects. Staff may order too many items. There may be imperfections within the inventory. When these circumstances occur, CVS may not know how they will get rid of the inventory, therefor accountants may apply a method called the lower of cost procedure. If the accounting records show a higher cost and the lower of cost practice had to be applied to the problematic inventory, then the records require an adjustment.

Nowadays, in an era that has advanced technology and a place in the world. Everything can be linked only at your fingertips in the times of rapidly developing with the sophisticated technology of today. Therefore, an inventory system is also not lagging behind in introducing a method of keeping an inventory data systematically and safely. The system plays a very important role in improving the competitiveness of a business. Usually, organizations today face too many challenges to achieve the cost, speed and reliability. Efficient inventory system really help in order to make sure the store’s performance and data record is always in good condition and secured from abusers. The system basically to ease the admin to manage the

Inventory management has two very different, but effective methods: Vendor managed inventory, and consignment inventory. A company may choose to utilize either of these two methods to manage inventory. If a company is able to manage inventory, they will be better able to work the company's capital to the fullest extent. The following paper will identify the differences between the two as well as identify what type of company is best suited for each method.

When inventories are low and under good control, the valuation of inventory becomes much less complex. Lean Accounting contains a number of methods for valuing inventory that are simple, accurate and often visual. Several of these methods do not require any computer-based inventory tracking at all.