client understanding
Client Understanding Paper
Client: The ADT Corporation
I thank you for the opportunity to work with The ADT Corporation on this important project. As I was analyzing the papers provided, I realized that additional information is requested by your representatives. It was brought to my attention that ADT and its affiliates are unclear about why the additional information was requested on the adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. The adjusting lower cost of market inventory on valuation is specified in Accounting Research Bulletin No. 43 (ARB No. 43). The Statement of Financial Accounting Standards (SFAS) No. 34 is the statement, which deals with capitalization of interest as part of the cost of the asset. The SFAS No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets. New rules for the accounting for goodwill have been addressed in SFAS No. 142. To be able to complete the analysis of the work papers of my clients’, certain information must be obtained. To alleviate the concern of the client of why the information is requested analysis of each topic and its importance will be discussed in this paper. The adjusting lower cost of market inventory valuation is essential because through the life cycle of inventories, the inventories will decline in value. Although the primary basis of accounting for inventories is cost, when inventories usefulness become lower than cost, then the use of adjusting lower cost of market is accepted. There are many advocates that think that inventories should be valued at market price. The belief is assets should reflect current values. Generally Accepted Accounting Principles (GAAP) instructs that when inventories decline in value, the future selling price should move in the same direction in the same time period. The
Client: The ADT Corporation
I thank you for the opportunity to work with The ADT Corporation on this important project. As I was analyzing the papers provided, I realized that additional information is requested by your representatives. It was brought to my attention that ADT and its affiliates are unclear about why the additional information was requested on the adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. The adjusting lower cost of market inventory on valuation is specified in Accounting Research Bulletin No. 43 (ARB No. 43). The Statement of Financial Accounting Standards (SFAS) No. 34 is the statement, which deals with capitalization of interest as part of the cost of the asset. The SFAS No. 144 addresses the reporting and accounting for the impairment of the disposal of long-lived assets. New rules for the accounting for goodwill have been addressed in SFAS No. 142. To be able to complete the analysis of the work papers of my clients’, certain information must be obtained. To alleviate the concern of the client of why the information is requested analysis of each topic and its importance will be discussed in this paper. The adjusting lower cost of market inventory valuation is essential because through the life cycle of inventories, the inventories will decline in value. Although the primary basis of accounting for inventories is cost, when inventories usefulness become lower than cost, then the use of adjusting lower cost of market is accepted. There are many advocates that think that inventories should be valued at market price. The belief is assets should reflect current values. Generally Accepted Accounting Principles (GAAP) instructs that when inventories decline in value, the future selling price should move in the same direction in the same time period. The
References: Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2005). Financial Accounting Theory and Analysis (8th ed.). Hoboken, NJ: John Wiley & Sons. http://www.referenceforbusiness.com/small/Bo-Co/Capital-Gain-Loss.html http://www.middlecity.com/ch09.shtml http://www.nysscpa.org/cpajournal/2004/1004/essentials/p30.htm http://www.accountingformanagement.com/aicpa_cost_market_rules.htm