Week 2 Client Paper

Week 2 Client Paper - Client Understanding Paper 1 Client...

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Client Understanding Paper 1 Client Understanding Paper University of Phoenix ACC 541—Accounting theory and Research Professor: Cecil B. Lucy Lien Bach November 6, 2010
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Client Understanding Paper 2 Thank you for your business and the opportunity to address your current questions about inventory adjustment to the lower of cost or market, the capitalization of interest on construction projects, the recognition of a loss or gain on the disposal of an asset, and the impairment testing of goodwill. As a company operates its business in the United State, these concerns will explain based on the Generally Accepted Accounting Principles (GAAP) such as: ARB No. 43 addresses the concern of Inventory adjustments to lower of cost or market; SFAS No. 34 addresses the capitalization of interest on construction projects; SFAS No. 144 discusses the financial impact and classification of a gain or loss on a disposed asset; and SFAS No. 142 provides guidance regarding testing for the impairment of goodwill. Adjusting lower cost of market inventory on valuation According to Cathey-Clark-Schroeder, the valuation of inventories is of major importance because it is one of the biggest portions of assets that have a significant impact on working capital of the company. The valuation of inventories is also impact on the net income which affect to the financial reports, so companies must find a good way to evaluate its inventory appropriately. In addition, FASB issued the statement ARB No. 4, chapter 4 "Inventory Pricing" to address that "under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and re-handling costs may be so abnormal as to require treatment as current period charges." (Financial Accounting Standard Board, n.d). Therefore, the inventory valuations require the adjustment of
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Week 2 Client Paper - Client Understanding Paper 1 Client...

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