Response to clients concerns
Response to Clients Concerns
Stephen Polich
University of Phoenix ACC 541
Abstract
This analysis will discuss the accounting practicesfor adjusting inventory to the lower of cost or market valuation as described in ARB No. 43, capitalization of interest on construction projects as described in SFAS No. 34, recording the gain or loss on the disposal of an assets described in SFAS No. 144 and analyzing and testing for impairment of goodwill as described in SFAS No. 142.
Response to clients concerns
Thank you for the opportunity of address your current needs concerning inventory adjustment for the lower of cost or market, cost deferral of capitalized interest on construction projects, the recognition of the loss or gain of asset disposals and the adjustment for impaired goodwill. Per Generally Accepted Accounting Principles (GAAP) ARB No. 43 addresses the concern of Inventory adjustments to lower of cost or market (Financial Accounting Standards Board [FASB], n.d.), SFAS No. 34 address the capitalization of interest on construction projects, SFAS No. 144 discusses the financial impact and classification of a gain or loss on a disposed asset and SFAS No. 142 provides guidance regarding testing for the impairment of goodwill. I am hopeful that the analysis and interpretation of these accounting principles assist in providing and improving your entity’s knowledge and internal controls.
Inventory adjustments to the Lower of Cost or Market
During year-end valuations, it is required to review the value assigned to ending inventory, since the amount allocated to inventory has a direct impact to both the Balance Sheet (this is usually the largest portionof current assets) and Financial Statements (generally the largest item that will affect net income). Inventory valuations require the adjustment of the “lower of cost or market” (Schroefer, Clark, & Cathey, 2005, p. 256), simply stated the value of the...