Listing Category: Financial Reporting and Analysis

Inventory Methods: FIFO vs. LIFO vs. Average Cost vs. Specific Identification and Periodic vs. Perpetual

I apologize in advance: this article’s long.

Every inventory method has two important characteristics:

How will costs be assigned to cost of goods sold (COGS) and ending inventory (EI)?
When will those costs be assigned to COGS and EI?…

Leases: General

A lease is a contract that lets one party use an asset owned by another party, in exchange for periodic payments. The owner of the asset is the lessor; the user of the asset is the lessee.

Investments in Financial Assets

When one company buys securities (stock or bonds) issued by another company, the accounting treatment for those investments depends on the amount of influence/control that the investing company has over the issuing company. When the investor has no influence (generally assumed when the investment represents less than 20% ownership), then the investment is treated as an investment in financial assets (as opposed to an investment in an associate, joint venture, business combination, SPE, or VIE).

Current Rate vs. Temporal: Why Two Methods?

Truth be told, I have no idea what the exact reasons are that we use two strikingly different methods – the current rate method and the temporal method – for changing the values from those in one currency (the local currency) to those in another currency (the presentation currency).