Client Understanding Paper
Client Understanding Paper
Dion Bascom
ACC541
August 19, 2013
Professor Corder
Client Understanding Paper The information my organization request is important for us to better understand how the adjustment of the information on inventory valuation, interest capitalization, recording gain or loss on asset disposal and goodwill impairment are done. It is important for us to understand the accounting procedures being used so we can identify this information and determine if compliance with the accounting principles is coherent with Generally Accepted Accounting Principles (GAAP). If a conclusion is reached that the organization accounting principles are conflicting, then the proper adjustments will have to be made to avoid any compliance issues with the Generally Accepted Accounting Principles (GAAP). These topics will be explained to clarify the proper treatment of these items based on FASB standards and the reasoning for the requested review. The fluctuation of the value of inventory occurs constantly in business because of the constant adjustments in accounting theories to account for inventories created through the innovations of technology. Accountants are required to follow certain principles and guidelines that are recognized by Generally Accepted Accounting Principles (GAAP) when reporting the valuation of inventory. The conservatism principle is correlated to lower of cost method or market (LCM) and is referred to by accountants. The conservatism principle and detailed accounting pronouncements, Accounting Research Bulletin No. 43 (ARB No. 43) lead to an accounting valuation method recognized as the lower of cost or market, or LCM (Weygandt, Kieso, & Kimmel, 2005). In the valuation of inventory, when the inventory value is lower than its cost, the inventory is written down to its market value or current replacement value or cost (Weygandt, Kieso, & Kimmel, 2005). An asset is a defined as an economic resource. It is considered to be not
Dion Bascom
ACC541
August 19, 2013
Professor Corder
Client Understanding Paper The information my organization request is important for us to better understand how the adjustment of the information on inventory valuation, interest capitalization, recording gain or loss on asset disposal and goodwill impairment are done. It is important for us to understand the accounting procedures being used so we can identify this information and determine if compliance with the accounting principles is coherent with Generally Accepted Accounting Principles (GAAP). If a conclusion is reached that the organization accounting principles are conflicting, then the proper adjustments will have to be made to avoid any compliance issues with the Generally Accepted Accounting Principles (GAAP). These topics will be explained to clarify the proper treatment of these items based on FASB standards and the reasoning for the requested review. The fluctuation of the value of inventory occurs constantly in business because of the constant adjustments in accounting theories to account for inventories created through the innovations of technology. Accountants are required to follow certain principles and guidelines that are recognized by Generally Accepted Accounting Principles (GAAP) when reporting the valuation of inventory. The conservatism principle is correlated to lower of cost method or market (LCM) and is referred to by accountants. The conservatism principle and detailed accounting pronouncements, Accounting Research Bulletin No. 43 (ARB No. 43) lead to an accounting valuation method recognized as the lower of cost or market, or LCM (Weygandt, Kieso, & Kimmel, 2005). In the valuation of inventory, when the inventory value is lower than its cost, the inventory is written down to its market value or current replacement value or cost (Weygandt, Kieso, & Kimmel, 2005). An asset is a defined as an economic resource. It is considered to be not
References: www.wikihow.com www.accountingcoach.com Weygandt, Kieso, & Kimmel, 2005