Nash-Finch Inventory Analysis
Nash-Finch Company and Subsidiaries
Inventory Analysis
ACCT 6610/5610
1. Download a copy of Nash-Finch Company and Subsidiaries 2012 10-K filed with the SEC on February 28, 2013. You do not need to hand the 10-K in with your assignment, but you will refer to it in answering the questions below.
2. What does Nash-Finch do?
Nash-Finch was established in 1885 and incorporated in 1921. They are the largest food distributor servicing military commissaries and exchanges in the US (in terms of revenue). The core business Nash-Finch does includes distributing food to military commissaries and independent grocery stores. They also distribute and operate their own corporate-owned retail stores.
3. What inventory method (or methods) does Nash-Finch use to account for its inventory? Where did you find this information? If Nash-Finch uses LIFO for some or all of its inventories, what do you think motivated management to select this method?
Under the inventories footnotes, below the financial statements (page 46), Nash-Finch says that 79% of their inventories are valued with LIFO. The additional 21% is calculated using FIFO. By using LIFO, Nash-Finch is able to report lower holding inventories by $90.7 million for 2012. Being able to report lower inventories lets the company defer holding gains and not pay taxes on that additional amount of inventory. They are also able to post higher cash flows from operating activities, which makes the company look better.
4. When a company uses LIFO during a period of rising prices they defer the recognition of holding gains on inventory. Companies use a variety of language to refer to the amount of the unrecognized holding gain, but if they use LIFO they must disclose the amount of the deferred holding gain. Some companies refer to the holding gain as the “LIFO reserve.” Some describe it as the amount by which reported inventories would have been higher if accounted for under FIFO. As of Dec. 29, 2012, what
Inventory Analysis
ACCT 6610/5610
1. Download a copy of Nash-Finch Company and Subsidiaries 2012 10-K filed with the SEC on February 28, 2013. You do not need to hand the 10-K in with your assignment, but you will refer to it in answering the questions below.
2. What does Nash-Finch do?
Nash-Finch was established in 1885 and incorporated in 1921. They are the largest food distributor servicing military commissaries and exchanges in the US (in terms of revenue). The core business Nash-Finch does includes distributing food to military commissaries and independent grocery stores. They also distribute and operate their own corporate-owned retail stores.
3. What inventory method (or methods) does Nash-Finch use to account for its inventory? Where did you find this information? If Nash-Finch uses LIFO for some or all of its inventories, what do you think motivated management to select this method?
Under the inventories footnotes, below the financial statements (page 46), Nash-Finch says that 79% of their inventories are valued with LIFO. The additional 21% is calculated using FIFO. By using LIFO, Nash-Finch is able to report lower holding inventories by $90.7 million for 2012. Being able to report lower inventories lets the company defer holding gains and not pay taxes on that additional amount of inventory. They are also able to post higher cash flows from operating activities, which makes the company look better.
4. When a company uses LIFO during a period of rising prices they defer the recognition of holding gains on inventory. Companies use a variety of language to refer to the amount of the unrecognized holding gain, but if they use LIFO they must disclose the amount of the deferred holding gain. Some companies refer to the holding gain as the “LIFO reserve.” Some describe it as the amount by which reported inventories would have been higher if accounted for under FIFO. As of Dec. 29, 2012, what