Client Understanding Paper
Mary Jacks
ACC/541
November 18, 2013
Valerie Turnbow
Thank you for affording me the opportunity to work on this assignment. While looking over the documents provided, I concluded that additional information was needed. I was informed that you were questioning my request for more information on the following topics: adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. By referencing the accounting principles and practices, I hope that you and your company will have better insight of my analysis of this project. In regards to adjusting lower cost or market inventory on valuation, Accounting Research Bulletin No. 43 outlines it meaning. Depending on the quality and framework of the inventory, the rule of cost or market, whichever is lower, can be applied either directly to each item or to the total of the inventory. The method chosen should be the one that most clearly reflects periodic income (ARB No. 43, 1953). Inventory valuation has a direct effect on the final results of income. The smallest adjustment to inventory will cause the same amount of change in your reported income. Because I make every effort to present financial data objectively, I prefer not to overstate your assets and income. Concerning your inventory, it needs to be determined if there is a sure timeframe as to when and if the inventory will be sold. Due to this uncertainty, the inventory should be evaluated at lower of cost or market. What this means is that if your inventory is represented on the accounting records at greater than its market value, a write-down from the recorded cost to the lower market value would be made. In the end, this would result in a reduction of income. Market value is extremely