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Lower Of Cost Or Market
In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory. Normally, ending inventory is stated at historical cost. However, there are times when the original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value. If the inventory has decreased in value below historical cost, then its carrying value is reduced and reported on the balance sheet. The criterion for reporting this is the current market value. Any loss resulting from the decline in the value of inventory is charged to "cost of goods sold" (COGS) if non-material, or "loss on the reduction of inventory to LCM" if material. History The lower of cost or market concept first became part of normal accounting practices in England during the nineteenth century. Lower of cost or market was considered fair because assets were valued on a going-concern basis, rather than the price at which the assets were purch ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accounting
Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activities and conveys this information to a variety of stakeholders, including investors, creditors, management, and Regulatory agency, regulators. Practitioners of accounting are known as accountants. The terms "accounting" and "financial reporting" are often used interchangeably. Accounting can be divided into several fields including financial accounting, management accounting, tax accounting and cost accounting. Financial accounting focuses on the reporting of an organization's financial information, including the preparation of financial statements, to the external users of the information, such as investors, regulators and suppliers. Management accounting focuses on the measurement, analysis and reporting of information for internal use by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Convention Of Conservatism
In accounting, the convention of conservatism, also known as the doctrine of prudence, is a policy of anticipating possible future losses but not future gains. It states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected. This policy tends to understate net assets and net income, and therefore lead companies to "play safe". When given a choice between several outcomes where the probabilities of occurrence are equally likely, one should recognize that transaction resulting in the lower amount of profit, or at least the deferral of a profit. Conservatism plays an important role in a number of accounting rules, including the allowance for doubtful debts and the lower of cost or market rule, which states that one should record inventory at the lower of either its acquisition cost or its current market value. See also *Generally Accepted Accounting Principles Publicly traded companies typically are subj ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Valuation (finance)
In finance, valuation is the process of determining the value of a (potential) investment, asset, or security. Generally, there are three approaches taken, namely discounted cashflow valuation, relative valuation, and contingent claim valuation. Valuations can be done for assets (for example, investments in marketable securities such as companies' shares and related rights, business enterprises, or intangible assets such as patents, data and trademarks) or for liabilities (e.g., bonds issued by a company). Valuation is a subjective exercise, and in fact, the process of valuation itself can also affect the value of the asset in question. Valuations may be needed for various reasons such as investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability. In a business valuation context, various techniques are used to determine the (hypothetical) price that a third party would pay for a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inventory
Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the shape and placement of stocked goods. It is required at different locations within a facility or within many locations of a supply network to precede the regular and planned course of production and stock of materials. The concept of inventory, stock or work in process (or work in progress) has been extended from manufacturing systems to service businesses and projects, by generalizing the definition to be "all work within the process of production—all work that is or has occurred prior to the completion of production". In the context of a manufacturing production system, inventory refers to all work that has occurred—raw materials, partially finished products, finished products prior to sale and departure from the manufacturing ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Historical Cost
The historical cost of an asset at the time it is acquired or created is the value of the costs incurred in acquiring or creating the asset, comprising the consideration paid to acquire or create the asset plus transaction costs. Historical cost accounting involves reporting assets and liabilities at their historical costs, which are not updated for changes in the items' values. Consequently, the amounts reported for these balance sheet items often differ from their current economic or market values. While use of historical cost measurement is criticised for its lack of timely reporting of value changes, it remains in use in most accounting systems during periods of low and high inflation and deflation. During hyperinflation, International Financial Reporting Standards (IFRS) require financial capital maintenance in units of constant purchasing power in terms of the monthly CPI as set out in IAS 29, Financial Reporting in Hyperinflationary Economies. Various adjustments to hi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Net Realizable Value
Net realizable value (NRV) is a measure of a fixed or current asset's worth when held in inventory, in the field of accounting. NRV is part of the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. Net realizable value is generally equal to the selling price of the inventory goods less the selling costs (completion and disposal). Therefore, it is expected sales price less selling costs (e.g. repair and disposal costs). NRV prevents overstating or understating of an assets value. NRV is the price cap when using the Lower of Cost or Market Rule. Under IFRS, companies need to record the cost of their ending inventory at the lower of cost and NRV, to ensure that their inventory and income statement are not overstated (under ASPE, companies record the lower of cost and market value). For example, under IFRS, at a company's year end, if ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Balance Sheet
In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". It is the summary of each and every financial statement of an organization. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business's calendar year. A standard company balance sheet has two sides: assets on the left, and financing on the right–which itself has two parts; liabilities and ownership equity. The main categories of assets are ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Market Value
Market value or OMV (open market valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or '' fair market value'', although these terms have distinct definitions in different standards, and differ in some circumstances. Definition International Valuation Standards defines market value as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion". Market value is a concept distinct from market price, which is "the price at which one can transact", while market value is "the true underlying value" according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cost Of Goods Sold
Cost of goods sold (COGS) (also cost of products sold (COPS), or cost of sales) is the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of purchase, costs of conversion and other costs that are incurred in bringing the inventories to their present location and condition. Costs of goods made by the businesses include material, labor, and allocated overhead. The costs of those goods which are not yet sold are deferred as costs of inventory until the inventory is sold or written down in value. Overview Many businesses sell goods that they have bought or produced. When the goods are bought or produced, the costs associated with such goods are capitalized as part of inventory (or stock) of goods. These costs are treated as an expense in the period the business recognizes income from sale of the good ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
International Standard Serial Number
An International Standard Serial Number (ISSN) is an eight-digit to uniquely identify a periodical publication (periodical), such as a magazine. The ISSN is especially helpful in distinguishing between serials with the same title. ISSNs are used in ordering, cataloging, interlibrary loans, and other practices in connection with serial literature. The ISSN system was first drafted as an International Organization for Standardization (ISO) international standard in 1971 and published as ISO 3297 in 1975. ISO subcommittee TC 46/SC 9 is responsible for maintaining the standard. When a serial with the same content is published in more than one media type, a different ISSN is assigned to each media type. For example, many serials are published both in print and electronic media. The ISSN system refers to these types as print ISSN (p-ISSN) and electronic ISSN (e-ISSN). Consequently, as defined in ISO 3297:2007, every serial in the ISSN system is also assigned a linking ISSN ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inventory Valuation
An inventory valuation allows a company to provide a monetary value for items that make up their inventory. Inventories are usually the largest current asset of a business, and proper measurement of them is necessary to assure accurate financial statements. If inventory is not properly measured, expenses and revenues cannot be properly matched and a company could make poor business decisions. Inventory accounting system The two most widely used inventory accounting systems are the periodic and the perpetual. * ''Perpetual:'' The perpetual inventory system requires accounting records to show the amount of inventory on hand at all times. It maintains a separate account in the subsidiary ledger for each good in stock, and the account is updated each time a quantity is added or taken out. * ''Periodic:'' In the periodic inventory system, sales are recorded as they occur but the inventory is not updated. A physical inventory must be taken at the end of the year to determine the co ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
