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6.0. Analysis of INVENTORIES - Coggle Diagram
6.0. Analysis of INVENTORIES
Summary of Valuation method of Inventory
coi ở P.31-32/128 trong vở và P.127 trong SLIDE
LIFO Liquidation
When a firm using LIFO sells more inventory than it produces/purchases during a period
Indication: a
decline in the LIFO reserve
from the prior period may be indicative of LIFO liquidation
Reasons
Outside: Labour strikes at a supplier
Inside the managemant control
Economic recession or declinging customer demand
Earnings management: intentionally reducing inventory to inflate earnings
Analytical implication
Review LIFO reserve footnote disclosures to determine if LIFO liquidation has occurred => ko dùng năm đó để forecast
LIFO Reserve
LIFO reserve = Inventory FIFO - Inventory LIFO
Used to companies using LIFO with companies not using LIFO
For companies using the LIFO, LIFO reserve must be disclosed under GAAP requirement in footnotes
Conversion from LIFO to FIFO method:
(1) Inventory: Inventory FIFO = Inventory LIFO + LIFO reserve
(2) COGS: Cogs FIFO = Cogs LIFO - (ending LIFO reserve - beginning LIFO reserve)
Measurement of inventory
Coi P.35 trong vở và P.131-132 trong SLIDE
Inventory presentation and disclosure
IFRS
Acc policies applied
Carrying amount, classified as separate components
Carrying amount of items recognized at NRV
Written-down amount recognized as expenses in the period
Amount of reversal in the period (IFRS only, GAAP do not allow reversal)
The circumstances or events that led to the reversal of a write-down of inventories
Carrying amount of invetories pledged as securitites for liabilities
Cost of inventories recognized as expense (COGS)
GAAP: same IFRS,
but exclude
the requirements for reversal, and
add
disclosures of significant estimates and material amounts