Client Understanding Paper
As the newly appointed Staff I accountant for the firm the opportunity arose to work with your organization in explaining several aspects relating to tangible and intangible assets, and what information is required to correctly account for them in the accounts. In looking at the working papers it is clear to see that questions arose in several areas;
“Adjusting lower cost of market inventory on valuation
Capitalizing interest on building construction
Recording gain or loss on asset disposal
Adjusting goodwill for impairment”
(University of Phoenix, 2009)
Each of the above topics will be discussed individually, guidelines and advice offered as to how to correctly treat them in the accounts. Questions have been raised and “brought to my attention regarding the fact that there is uncertainty as to why specific information has been asked for in reference to the adjusting lower cost of market inventory valuation, capitalizing interest on building construction, the recording of gain or loss on asset disposal and the adjusting goodwill for impairment.”
There are several standards across the boards that affect what is required of a company these are:
“ARB No. 43 specifies that inventory should be stated at cost or market, whichever is lower (Financial Accounting Standards Board [FASB], n.d.).
Statement of Financial Accounting Standards (SFAS) No. 34 requires that interest be capitalized as part of the cost of the asset.
SFAS No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets.
Financial Accounting Standards Board (FASB) has adopted SFAS No. 142, which has established new rules in accounting for goodwill.”
Adjusting lower cost of market inventory on valuation
Inventory valuation is a financial method which assists the companies in providing monetary value to the products which make up the inventory of the...