Client Understanding Paper
- Submitted by: cbroussard06
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- Category: Other
- Date Submitted: 04/11/2010 08:58 PM
- Pages: 6
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Client Understanding Paper
I am looking forward to working with you and your organization on this project. I have requested additional information from your organization in reference to capitalizing interest on building construction, adjusting lower cost of market inventory valuation, recording gain or loss on asset disposal, and goodwill impairment adjustments. From my understanding, you are unclear to why I have requested additional information. “Statement of Financial Accounting Standards (SFAF) No. 34—“Capitalization of Interest Cost, states the amount capitalized is to be an allocation of the interest cost incurred during the period required to complete the asset” (Financial Accounting Standards Board). Statement of Financial Accounting Standards No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets. “In 2001, the FASB issued STAS No. 142, “Goodwill and Other Intangible Assets, which changed the method of accounting for some intangible assets” (“Financial Accounting Standards Board“, 2001). I will be explaining each item in full detail of the accounting principles and practices improve the organization’s practices and knowledge from this analysis.
Lower Cost of Market
The lower-of-cost or market (LCM) is defined by “a basis whereby inventory is stated at the lower of either its cost or its market cost as determined by current replacement cost” (Kimmel, Weygandt, & Kieso, 2007, p. 280). When the cost is lower than the value of inventory, businesses can write down there inventory to market value. The word market in lower-of-cost or market means the cost to replace the item by purchase or reproduction. The word cost means the acquisition price, which inventory is computed using the historical cost-based method. Under the LCM, market also is referred as current replacement cost, not selling price. “Using replacement cost allows a company to maintain a consistent rate of gross profit on sales” (Kieso,...
I am looking forward to working with you and your organization on this project. I have requested additional information from your organization in reference to capitalizing interest on building construction, adjusting lower cost of market inventory valuation, recording gain or loss on asset disposal, and goodwill impairment adjustments. From my understanding, you are unclear to why I have requested additional information. “Statement of Financial Accounting Standards (SFAF) No. 34—“Capitalization of Interest Cost, states the amount capitalized is to be an allocation of the interest cost incurred during the period required to complete the asset” (Financial Accounting Standards Board). Statement of Financial Accounting Standards No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets. “In 2001, the FASB issued STAS No. 142, “Goodwill and Other Intangible Assets, which changed the method of accounting for some intangible assets” (“Financial Accounting Standards Board“, 2001). I will be explaining each item in full detail of the accounting principles and practices improve the organization’s practices and knowledge from this analysis.
Lower Cost of Market
The lower-of-cost or market (LCM) is defined by “a basis whereby inventory is stated at the lower of either its cost or its market cost as determined by current replacement cost” (Kimmel, Weygandt, & Kieso, 2007, p. 280). When the cost is lower than the value of inventory, businesses can write down there inventory to market value. The word market in lower-of-cost or market means the cost to replace the item by purchase or reproduction. The word cost means the acquisition price, which inventory is computed using the historical cost-based method. Under the LCM, market also is referred as current replacement cost, not selling price. “Using replacement cost allows a company to maintain a consistent rate of gross profit on sales” (Kieso,...