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Three Little Pigs, Inc.

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Three Little Pigs

We can conclude that PIGS will recognize the use of the lower of cost or market because of the “decrease in price” for live hogs and developing animals held for sale to third parties if we evaluate ASC 330-10-35-2, which states that “…, in accounting for inventories, a loss shall be recognized whenever the utility of goods is impaired by damage, deterioration, obsolescence, changes in price levels, or other causes. The measurement of such losses shall be accomplished by applying the rule of pricing inventories at the lower of cost or market.” Since we are dealing with specialized inventories, we can further uphold our previous position by looking at ASC 905-330-35-2 that states that “Developing animals to be held for sale shall be valued at the lower of cost or market” and ASC 905-330-35-2 which states “Animals held for sale shall be valued at either of the following: a. The lower of cost or market b. At sales price less estimated costs of disposal, if all the following conditions exist: 1. The product has a reliable, readily determinable, and realizable market price. 2. The product has relatively insignificant and predictable costs of disposal. 3. The product is available for immediate delivery. Inventories of harvested crops and livestock held for sale and commonly referred to as valued at market are actually valued at net realizable value.” Since we do not know if PIGS meets the conditions listed in ASC 905-330-35-2(B), then we can assume that the lower of cost or market will be the value for the live hogs that are held for sale. Now that we have established that PIGS will incur an inventory impairment and value them at the lower of cost or market for the live hogs and developing animals held for sale to third parties, we need to determine how the lower of cost or market will be applied to these inventories. ASC 330-10-35-10 states...

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