Inventories

1
Inventories

• Acquisition
• Carrying Method
• Cost Flow Assumptions
• Valuation

2
Types of Inventories

• Merchandise--RM or FG
• Manufactured--RM, WIP FG

3
Carrying Method

• Perpetual BI I - O EI
• Inventory
• Periodic BI I - EI O
• Purchases

4
Acquisition-When?

• FOB
• Risk of loss
• Consignment

5
Acquisition-What?

• Cost of
• manufacturing
• acquisition
• storage
• preparation
• freight
• taxes and fees
• packaging

6
Cost Flow Assumptions

• Averaging
• Specific identification
• FIFO
• LIFO
• Dollar Value LIFO

7
FIFO and LIFO

• Use under different carrying methods
• LIFO conformity
• LIFO disclosure
• LIFO liquidations
• Conversion from FIFO

8
Dollar Value LIFO-Attributes

• Simplifies LIFO
• Minimizes LIFO liquidation risk
• Focuses on overall value

9
DVL-Methodology

• Cost index
• Base year valuation
• Identification of layers
• Conversion of layers to current cost
• See p. 362

10
Lower of Cost or Market (LCM)-Calculation

• Market replacement cost
• Ceiling NRV (SP - cost to complete)
• Floor NRV - normal profit
• See p. 381

11
LCM Application

• Multiple groupings
• See p. 383