Avoiding Management Letter Comments – Inventory

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Common issues related to accounting for inventory include: incorrect valuation, too small or no allowances for slow moving inventory, not disposing of obsolete inventory and not having a regular count of inventory on hand.

Inventory should be valued at the lower of cost or market. The value of all items should be compared to market at least annually to ensure that market prices have not fallen below cost. If the market price has declined to less than the cost of the item in inventory an adjustment should be booked to reduce the recorded value. A key indicator would be if your …read more

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