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Lecture Intermediate accounting (Volume 1, IFRS edition): Chapter 9 - Kieso, Weygandt, Warfield

Chapter - Inventories: Additional valuation issues. After completing this chapter you should be able to: Describe and apply the lower-of-cost-or-market rule, explain when companies value inventories at net realizable value, explain when companies use the relative sales value method to value inventories, discuss accounting issues related to purchase commitments.and other contents. | C H A P T E R 9 INVENTORIES: ADDITIONAL VALUATION ISSUES Intermediate Accounting IFRS Edition Kieso, Weygandt, and Warfield Describe and apply the lower-of-cost-or-net realizable value rule. Explain when companies value inventories at net realizable value. Explain when companies use the relative sales value method to value inventories. Discuss accounting issues related to purchase commitments. Determine ending inventory by applying the gross profit method. Determine ending inventory by applying the retail inventory method. Explain how to report and analyze inventory. Learning Objectives Special valuation situations Relative sales value Purchase commitments Lower-of-Cost-or-Net Realizable Value (LCNRV) Valuation Bases Gross Profit Method Retail Inventory Method Presentation and Analysis Net realizable value Illustration of LCNRV Application of LCNRV Recording net realizable value Use of an allowance Recovery of inventory loss Evaluation of rule Gross profit percentage Evaluation of method Concepts Conventional method Special items Evaluation of method Presentation Analysis Inventories: Additional Valuation Issues A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost. Lower-of-Cost-or-Net Realizable Value LO 1 Describe and apply the lower-of-cost-or-net realizable value rule. LCNRV Net Realizable Value LO 1 Describe and apply the lower-of-cost-or-net realizable value rule. Estimated selling price in the normal course of business less estimated costs to complete and estimated costs to make a sale. Illustration 9-1 Lower-of-Cost-or-Net Realizable Value Net Realizable Value LO 1 Describe and apply the lower-of-cost-or-net realizable value rule. Illustration 9-2 LCNRV Disclosures Lower-of-Cost-or-Net Realizable Value Illustration of LCNRV: Regner Foods computes its inventory at LCNRV. LO 1 Describe and apply the lower-of-cost-or-net realizable value rule. Illustration 9-3 . | C H A P T E R 9 INVENTORIES: ADDITIONAL VALUATION ISSUES Intermediate Accounting IFRS Edition Kieso, Weygandt, and Warfield Describe and apply the lower-of-cost-or-net realizable value rule. Explain when companies value inventories at net realizable value. Explain when companies use the relative sales value method to value inventories. Discuss accounting issues related to purchase commitments. Determine ending inventory by applying the gross profit method. Determine ending inventory by applying the retail inventory method. Explain how to report and analyze inventory. Learning Objectives Special valuation situations Relative sales value Purchase commitments Lower-of-Cost-or-Net Realizable Value (LCNRV) Valuation Bases Gross Profit Method Retail Inventory Method Presentation and Analysis Net realizable value Illustration of LCNRV Application of LCNRV Recording net realizable value Use of an allowance Recovery of inventory loss Evaluation of rule Gross profit percentage Evaluation of .