Measurement of Inventory at the Lower of Cost and Net Realisable Value
Under IFRS, inventories may be measured and carried on the balance sheet at a lower cost and net realizable value. US GAAP, on the other hand, specifies the lower cost or market to value inventories. Market value, for this purpose,…
Implications of Valuing Inventory at Net Realizable Value
Under IFRS, whenever the value of inventory declines below the carrying amount on the balance sheet, the inventory carrying amount must be written down to its net realizable value. Most importantly, the loss must be recognized as an expense on…
Presentation and Disclosures Relating to Inventories
Disclosures are very useful to users of financial statements, especially when analyzing a company’s performance. Coincidentally, the disclosure and presentation requirements are very similar under IFRS and US GAAP. Presentation and Disclosures Relating to Inventories Under IFRS, the following financial…
Examining a Company’s Inventory Disclosures and Other Sources of Information
Financial statement analyses that fail to consider the impact of differences in methodologies adopted, disclosures made, and presentation formats are likely to result in faulty conclusions. An analyst has to have a critical mind and give consideration to the information…
Calculate and Compare Ratios of Companies
Financial ratios are very useful tools for comparing the financial performance of a company across time as well as against the performance of its peer companies or industry. In relation to inventory management, there are specific ratios that can assist…
Analyze and Compare the Financial Statements of Companies
A company’s choice of inventory valuation method can have a significant impact on the presentation of its financial statements. Financial items such as cost of sales, gross profit, net income, inventories, current assets, and total assets as well as the…
Sampling Considerations and 5 Common Biases in Sampling
Sampling considerations refer to the desirable characteristics that should always be taken into account when selecting a sample so as to increase chances of accurate estimation of population parameters. In general, larger samples are preferred to smaller ones because the…
Hypothesis Testing
A hypothesis is an assumptive statement about a problem, idea, or some other characteristic of a population. It can also be considered an opinion or claim about a given issue. Therefore, a statistical test has to be performed to establish…
One-tailed vs. Two-tailed Hypothesis Testing
A one-tailed test (one-sided test) is a statistical test that considers a change in only one direction. In such a test, the alternative hypothesis either has a < (less than sign) or > (greater than sign), i.e., we consider either…
Understanding Test Statistics
A test statistic is a standardized value computed from sample information when testing hypotheses. It compares the given data with what an analyst would expect under the null hypothesis. As such, it is a major determinant when deciding whether…
