The background and role of inventory in accounting

The background and role of inventory in accounting Introduction International accounting standard No.2 (IAS2) Inventory gives the rules which should be followed during the recording and presentation of inventory. Inventory refers to goods which are held by a firm for sale, are in the production process or are materials which will be consumed in the production process or in giving out of services. This standard does not apply to financial instruments and it gives out a guideline on how to measure an asset which is categorized as an inventory, which concept constitute of the cost and at what time an expense occurs and the information that should be disclosed while preparing the financial statements (International Accounting Standards Board, 2008, p.977). History In the year 1974 during the draft of standard, the name was changed to inventories from valuation and presentation of Inventories in the Context of the Historical Cost System the first draft was affected on 1st of January in the year 1995 and this was 21 years after the first draft exposure. On 18th of December 2003, the standard was revised and took effect as from the strart of January 2005. In the year 2003, there was a revised IAS 2 whereby different cost formulas for inventories were incorporated into the standard. These were superseded from SIC 1 on consistency. On December 1997, SIC 1 was issued and was effective as from 1st January 1999. sic 1 required that that the same cost formula was to be used for inventories with the same characteristics under IAS 2.21 AND IAS 2.23. in that case, different methods may be used where inventory items were different from other groups (International Accounting Standards Board, 2008, p.978). SIC stands for Standing International Committee (SIC), and it was renamed to International Financial Reporting Issues Committee (IFRIC). some of the issues in SIC were not added in IFRICs Agenda. This are as follows: IAS 2 Cash Discounts The question was whether cash discounts received should be subtracted from the cost of goods purchased. A decision was made in august of the year t 2002 that they should not be added. The reason given by IFRIC was that paragraph 8 of IAS 2 provided enough guidance and thus it was not necessary to publish on the interpretation on the issue. IAS 2 Consumption of inventories by service organizations The problem was on how to treat net realizable value when the inventory is consumed as part of the service rendered. A decision was made in the march of 2004 that it should not be added. It was noted that it existed for commercial bodies. It was thus concluded that the matter involved the recoverability of an asset which did not have a direct cash flow. IAS 2 Discounts and rebates In this part, three questions were considered, first, should the discount received for prompt payment of invoice be reduced from the cost of the inventories or seen as financing income? Second, should all other rebates be reduced from the cost of inventories or treat some of them as revenue or reduction in promotional expenses, lastly, if volume rebates should be given a recognition only when threshold volumes are achieved. The decision arrived at on November 2004 was not to add. Objective of IAS 2 IAS 2 has the objective of of prescribing how inventories should be treated in accounting. It provides a guideline on how to look for the cost of inventories and how to recognize an expense including any depreciation to net realizable value. It provides the formulas that should be used to assign costs to inventories. The conclusion is that, inventories should be measured at the lower between net realizable value and cost (Nikolai, Bazley, And Jones, 2009, p.80). Net realizable value refers to the estimated selling price in the course of normal business less the costs estimate for completing and the estimated costs required to finish the selling activity. The cost of inventory on the other hand shall comprise of all the costs of purchase, conversion in addition to other costs which are incurred in making the conditions to be in their present condition and into their present location. The standards require that the first in first out method is used in assigning the cost of inventories or the weighted average method. The same cost formula should be used by a firm for all similar stock and stock that has the same use to the firm. Where the inventories might have different use or are of different nature, different cost formulas can be used (Nikolai, Bazley, And Jones, 2009, p.80). Where inventory is sold, the expenses incurred during the sale of the inventory shall be seen as an expense in that period when the expense occurred. Amount realized from any reversal of a write-down in inventories coming up from a rise in net realizable value shall be treated as a reduction in amount of inventories recognized as an expense in the time or period when that reversal took place. Rationale The rationale for IAS 2 is to ensure that accounting for inventories is done in a manner which leads to the representation of the true value of the available inventory. It ensures that frequent research is done on how to present inventory in the financial statements. Measurement, presentation and disclosure details There are several items which need to be disclosed in the financial statements concerning inventory. One of the items that need to be disclosed includes the accounting policies that were adopted while giving value to the inventories. This includes the formula used to value the stock. In other words, the financial report should state whether first-in, first-out method was used or weighted average method was used. Secondly, the reports should show the total carrying amount for the inventories and they should be put into a classification which the entity feels fit. Thirdly, the carrying amount for the inventories that may be accounted for basing on their reasonable value minus the sale costs should also be clearly shown by the financial statement. The fourth thing that should be disclosed is the level of inventories recognized as an expense in that certain period. Following this, the level of inventory write-downs which might have been seen as an expense in the financial period should be shown. After this, the level of reversals for the previous value write-downs which may have been achieved as a reduction in the amount of the expense on account of the periods inventories. The activities which led to reversal should also be listed and finally, the carrying amount of inventories used as security for debt payment should also be shown (Barry and Eva, 2008, p.27). Comparison with US GAAP (inventory) As mentioned, IAS is an initioal for International Accounting Standards and it represents a set of accounting standards which are set by the international Accounting standards committee (IASC) which is in London, England. IASC has several bodies with the main one being the international Accounting Standards Board (IASB). IASB is responsible for setting standards for IASC. On the other hand, GAAP is an acronomy for Generally Accepted Accounting Principles. IASC is not responsible for setting GAAP and it thus does not have any legal authority over it. IASC can be thus be seen as an influential body which makes accounting rules. Many people listen to what IASB and IASC say on accounting matters (Barry, Nach, and Bragg, 2009, p.1337). When an accounting rule is set by IASB, several countries consider the rule and adopt it into its accounting system. The rules thus will eventually influence of what each country adopts as its GAAP. To understand what GAAP is better, we can say that it is a set of rules which accountants follow in their countries as each country has its own GAAP. There are however not much differences in GAAP between countries although their interpretations may vary between different countries. In the United States, there is the Financial Accounting Standards Board (FASB), and this make up the rules which eventually become GAAP for the country. Example from annual reports An example of an annual report which shows the usage of IAS 2 inventory is shown in the appendix. The report shows the consolidated financial statements for Prestige Brands Holdings, Inc. which is a distributor and marketer of brand name through the counter drug, personal and household products which are sold through Canada, U.S. and other international markets. Discussion In the consolidated financial statements for the mentioned company, the first requirement for the IAS 2 has been met whereby the accounting policy that was used has been mentioned The reports states that the inventories have been stated at the lower of between the fair value and cost. The report has gone further to mention that the first-in, first-out method was used in valuing the inventory. The reports have explained that the company provides allowance for the goods which are slow moving and inventory which has become obsolete through the reduction of inventory for fall in value due to the obsolescence of products, damage and any other issues which might be affecting the marketability, equal to the difference that might exists between the cost of the inventory and its market value. Another thing that the report discloses is the factors which have been utilized in the determination of estimated market value and they include; current sales data and historical return rates, the estimates for demand in future, the competitive pricing pressures, introduction of new production, expiration dates of products and obsolescence of components and packaging.

Research on Cost Control and Management of Real Estate Project Essay

This paper takes the cost control and the management of real estate project as the object in research, and analyzes and studies relevant issues. By analyzing the cost structure of real estate construction, this paper identifies problems in cost control and management of real estate construction at present. Along with the fast development of China’s economy, the real estate industry has achieved wonderful successes, pulling economic development significantly, and contributing a lot to China’s economic development. Today, real estate construction assumes more tasks. In 2008, 3,000 billion RMB enters real estate construction. The cost control and regular management of real estate construction turns into the focus. Once the construction cost is out of control, it will lead to a great waste and will bring about more pressures for property management in later. A nice cost control is meaningful for the whole real estate construction project. To realize better cost control and management of real estate construction is important for today’s harmonious society. The cost of real estate construction is composed of four parts. The first part is the land cost, accounting for 30% of the total cost. It mainly refers to cost for building land, greening land, equipped facility land, and property management land. The second part is the construction installation cost, as the main body of real estate construction cost, accounting for 20%-50% of the total cost. Among the construction installation cost, materials cost the most, accounting for 60% of construction installation cost. The third part is the cost for equipments and machines, accounting for 1%-3% of the total cost. This part is mainly for meeting the needs of operations, management, and maintenance. The fourth part is other cost, accounting for more than 15% of the total cost. It is difficult to control this part. It mainly includes the cost for investigation and design, the cost for project supervision, and the cost for infrastructure. In special, the management cost usually surpasses the budget, which is the largest part that is hard to control in real estate construction. The management cost is only accounting for 1% of the total cost. But the absolute amount is large. It is easy for the construction company costing more in management. At present, serious problems exist in the cost control and management of real estate construction. For example, for some real estate construction, the design is earlier than the study of feasibility, which makes the later turn into useless. In bidding, some construction companies perform illegally, which makes the bidding fail to control project cost well. The popularization of assigned subcontracts and various subcontracts serve as potential threats for project quality. The delay for project payment, especially for workers’ wages, is serious. Some projects can not manage the changes of designs. Construction companies fail to follow the designs completely, which may lead to larger costs for construction. Some construction companies emphasize on the control of quality and period but fail to control the cost. All these activities make the cost of real estate construction out of control in China, which is harmful for the sustainable and healthy development of real estate industry . * Fail to Estimate the Project Exactly: Investment estimation is performed at the very beginning, namely in the study of feasibility. Present compilation of study of feasibility is lack of details. No effective items to control the number of project. The estimation has a lower preciseness. Besides, the study of feasibility has no necessary investigation. Some potential geological disasters can not be identified effectively, which leads to the rise of costs. Although some companies make â€Å"details for implement†, the effect is poor. In order to establish the project, some companies may reduce the number of project and decrease costs. * The Compilation of Project Budget Has Poor Reliability: At the stage of design, the investigation is far from sufficient. Some fundamental materials for design are inexact. As a result, the design may be irrational and will be changed significantly in construction, which causes the poor reliability of budget. * Working Drawing Budget is Unpractical: At the working drawing design stage, compile the project budget according to the design. The working drawing budget is to calculate the cost of design. The rationality of working drawing budget is about how to organize the construction and how to reach the design requirements by what kinds of methods, plus how to arrange the construction period, and how to manage workers and machines under different seasons, according to scientific designs. All these tasks are supposed to be arranged by construction companies. For design companies, to compile the budget is unpractical. * Do not Follow Basic Construction Procedures and Cannot Control Costs: For some projects, time is urgent. Therefore, the design is maybe imperfect. And the construction does not follow the basic procedures strictly. Sometimes, the study of feasibility turns into useless papers. As a result, the estimation and the budget cannot control the project cost effectively. * Contract is not Managed Well, Especially for Subcontracts and External Workers: Some real estate developers neglect to manage contracts. They do not follow the terms written in contracts strictly. Besides, some developers cannot calculate the cost of project quantities correctly. They are incapable of managing external workers effectively. * Irregular Management and Many Changes for Project: Real estate developers cannot design properly and have to change the management methods. Or, the execution is weak. They can change the design as will. Then, the scale of project is increasing and the cost is rising. * The Financing Structure is Unreasonable and Depends on One Financing Channel too Much, Which Contributes to the Rise Of Costs: At present, the funds for real estate construction in China are mainly from domestic loans, foreign funds, self-collected by construction companies, and other sources. Although financing ways are few and some are immature, limits are more. Sometimes, funds can not arrive in time. In order to insure the process of project, the construction companies have to apply loans from banks. Therefore, a large proportion of construction funds are from banks as loans. And the credit period is long and cannot match with investment return. The characteristics of real estate industry determine the lagged-behind investment return. One financing channel increases risks and costs, which leads to the accumulation of loan balance in banks, increasing construction costs and pressures for later in operation. * Cost Management is Unscientific. Lack the Idea of Cost Control. System is Imperfect. Management Cost Is High: By auditing lots of projects, we find that management is one of factors that cause overspending. Main items that cause overspending include management fees, compensation fees for removing, and supervision. Main reasons include: Lack a perfect cost control system and cannot manage and control the cost systematically, which makes it hard to identify the out-of-control of cost in time. Lack the idea of cost control and the constraint mechanism. Project managers are always focusing on quality and construction period, but not cost control. The absence of system makes the expenditure more irregular. No integrated standards for management fee are effective. Workers are more than necessary in construction companies.

The Mysterious Nature of Faith - Free Essay Example

Sample details Pages: 6 Words: 1825 Downloads: 7 Date added: 2019/03/22 Category Religion Essay Level High school Tags: Faith Essay Did you like this example? In our daily life, we can hear people say that they have faith in something. But what on earth is faith? Generally, people may consider faith as religious beliefs. However, does having faith just mean believing in god? Or perhaps it has deeper implication? Do people voluntarily have faith or not? Throughout the history, many scholars and philosophers have tried to define the exact meaning of faith. Don’t waste time! Our writers will create an original "The Mysterious Nature of Faith" essay for you Create order Based on their solid foundation, I argue that faith is a kind of volitional belief, emotion of admiration and feeling of trust. Having faith means people use their volition to believe in and admire evidence that they think is true. On the other hand, it is about trusting our senses, emotions and perceptions so that we can continue to believe in other things in the world. Before getting straight to my point, lets start with the very beginning. Does having faith merely mean believing in God? In 1200s, a philosopher named Aquinas explained the existence of God in a rational way. He raised five ways, arguments from change, causation, contingency, degrees of excellence, and harmony, to demonstrate his statement. Lets go deeper into some of the ways he claimed. At first, in the argument from causation, Aquinas said that nothing can cause itself. There is no infinite causal chain in the universe. In this condition, there must have a first cause because there will be no intermediate causes or ultimate effect without the first cause. And there is necessarily a first cause that is called God. On the other hand, the argument from harmony, or design, is more controversial. According to Aquinas, nature is not intelligent but seems to behave in regular and goal-oriented ways. Everything is governed harmoniously. Why? He explained that it is because nature must be guided by something with lots of intelligence and that intelligent leader is God. Opponents drastically refuted that the universe or nature forms randomly. There is also a multi-universe theory that there thousands of universe and our universe is only one of them. Anyway, we cant really judge the authenticity of Aquinass arguments, but they can really make us ponder what faith is exactly. For a long time, people equated faith with religious beliefs. From his point of view, there are rational proofs of existence of God. Its really odd that by the time we believe some sound arguments and conclusions we have faith. Thus, it looks like faith is something other than belief in God. If faith doesnt mean belief in God, what can it be? Maybe faith is simply the same as belief? But what is belief? Universally, philosophers consider that belief has some special traits. First, belief is dispositional. It is similar to our unconscious behavior. For instance, we have the belief that water can quench peoples thirst. As we feel thirsty, we are disposed to look for water. Second, belief is involuntary. We spontaneously form the beliefs that we viewed as right and trustworthy in our minds. We cannot choose to believe things that are ridiculous to us. For example, in a rainy day, I cannot brainwash myself to form the belief that today is a sunny day. I can say those words but my behavior reveals that I do not really believe this. My behavior that I bring my umbrella is the evidence that I actually believe it is raining. Last but not least, belief is truth-tracking. It is easy to understand because people are all truth-tracking mechanisms. We always want to seek for the trut h and get things right. We use our perception and see from others to form our own beliefs. Our beliefs are likely to be wrong but we subjectively consider them as true. So how is faith related to belief? In the 4th century, Augustine came up with an argument that belief is a volitional content. Volitional means in your power. You may question that isnt belief involuntary? Maybe belief in his words is similar to so-called faith. Then, it seems that belief and faith are not exactly the same. In other words, faith may be a special kind of belief. Think it that way: having faith is more similar to believing in rather than believing. Believing in something means people choose to believe according to their will, while believing is involuntary. For example, when people believe in God, they not only believe the existence of God, they also pray and have special rituals to show their piety. Therefore, faith is more appropriate to be defined as believing in. Nevertheless, does believing in sound like trust? Trust may be relevant to faith as well. In 2006, Linda Zagzebski from University of Oklahoma put forward that self-trust is necessary for forming our conscientious beliefs. She stated that we need to trust our emotions. The importance of emotion is that it evaluates the situation. For example, fear tells us that something is dangerous and harmful to us. She explained faith by emphasizing on the emotion of admiration. When we admire someone, we actually consider that something about them is worthy of imitation and is a better version of ourselves. Then, we begin to compare which version of ourselves is better, the current one or the admirable one. On the one hand, we may feel that the admirable version is indeed a better version, which leads to convert. One the other hand, we think that there is something in our current version that is admirable. Then, we dont convert. So the main point of Zagzebski is that faith is not just about forming right beliefs, but it relates to our emotional lives. It is about trusting ourselves and about how we think and feel. We always say that we should have faith in love. Now, we have the understanding that we are not only faithful to the person we love but also faithful to a certain version of ourselves. The purpose of having a relationship with others is not just to find a person you can accompany, but to become a better version of ourselves. It seems that we have reached an agreement that faith have something in common with belief and trust. However, the discussion about nature of faith doesnt come to an end. In early to mid-20th Century, Sartre, a philosopher who advocated for existentialism, came up with a notion called bad faith. According to Sartre, we always have faith in something. We need faith to sustain our identity. What matters is that faith can be good faith or bad faith. What is bad faith? First, he stated that there are two aspects of human condition, facticity and transcendence. Facticity is a set of facts that cannot be altered. It is fixed. Transcendence is something that goes beyond the given. It is a function of consciousness. Consciousness always exceeds the facticity of current situation. In Sartres words, consciousness negates the present and brings negation or nothingness. Take a bottle for example; we can only see one side of the bottle at any position. However, we recognize it is a bottle of water because we use our consciousness to look things as if they had more sides. Our consciousness is always negating the given circumstances. For bad faith, it is the denial of some aspects of one human condition. When people deny their transcendence, they always deny their freedom and potentiality. They are constrained by their current situation. For example, some students always say that they do something because their parents let them do. This is a kind of bad faith because they deny the transcendence. They have the freedom to do something else but they dont. When people deny their facticity, they overestimate their freedom. It is a delusional thinking. In his book Being and Nothingness, he says that Bad faith does not hold the norms and criteria of truth as they are accepted by the critical thought of good faith. Bad faith and good faith are both certain ways of interpreting evidence. People with bad faith are aware of the evidence but refuse to pay attention to it. They only stick to their own evidence and ignore any counter-arguments. In contrast, good faith is a kind of critical thinking. People who believe something in good faith continuously open to new evidence in the basis of their evidence. They do not have certainties in their current beliefs and leave room for doubt. Based on predecessors theory, it is not difficult to understand my argument of the nature of faith. Faith is a kind of voluntary belief and admiration in something. To have faith, a person needs to trust his perception, memory and emotion; otherwise, he can doubt his faith. Now we can see faith in a deeper level. Having faith not only means being faithful to someone or something, but also means being faithful to certain version of ourselves. In order to become a better version of ourselves, we should always embrace new evidence and leave room from doubt. We shouldnt constrain ourselves in the current situation and believe our existing beliefs with certainties but go beyond what is. That is the purpose of having faith. As for Coates memoir, many people may think he had a bad faith. In the book, Coates considered black people as victims forced by U.S history. According to him, the social status of the black is fixed. It seems that it is a kind of bad faith because he understood his self-identity strictly in terms of his race, which denied his transcendence. But that is not true. He did write the book to encourage his son and people who read his book to struggle against the injustice in the country. He experienced the death of his colleague Prince Jones who was killed by a rampant policeman. Prince Jones was such a good Christian, scion of a striving class, in his words, but still died from shooting. For his death, Coates felt extremely irritated and hopeless. In his age, he was impossible to do radical revolts to overturn the discrimination in American culture. Thus, his book is a commitment to the future and a reminder to later generations. Furthermore, in the book, he shows strong sense of hatred towards the Dreamers. Dreamers fully believed the American Dream. However, they pursue their dream by freely plundering the bodies of human and earth. The policy of Dreamers created the tragedies in Chicago, Baltimore, and so on. It is these Dreamers who lack authentic self-understandings, trampled over black people and endangered the planet. Perhaps, this is a kind of bad faith. Coates did not blindly believe this kind of American Dream. For him, the real American Dream is that we all sober up, project our real self-identity and realize who we are exactly. His good faith is perfectly embodied in his dream. Work Cited Jean-Paul Sartre, Bad Faith, Being and Nothingness, Philosophical Library, in English, 1956. Print Ta-Nehisi Coates, Between the World and Me, New York: Spiegel Grau, 2015. print

Social Inequalities By Jonathan Kozal Essay - 1570 Words

simultaneously believe that schools are places where social inequalities should be equalized, where the advantages or disadvantages that children experience in their homes and families should not determine what happens to them in school-in essence, that school is a place where children should have equal chances to make the most of their potential.† (Inequality) The 1991 article Savage Inequalities written by Jonathan Kozal highlights the fact that every person is entitled to the right to receive quality care and education, but there can be overwhelming social factors that prevent students in a small Illinois town from getting an equal education. The author shrewdly described the morbid living conditions experienced by the residence of East St. Louis, Illinois. A predominately black community near the banks of the Mississippi River. However, despite the conditions that the cities kids have to endure, these students refuse to wallow in misery. These student have been written off for decades, but the courage that these kids have faced in the mist of crisis resulted in the 2016 varsity football team won the Illinois Class 5a championship. 21st Century inequalities are disguised to provide the illusion of equality. Ironically we are so equivalent thus unequal in the meantime; however the greater incongruity is somewhere else. This impacts the liberal spirit and creative political ability. Society is enthusiastic to envision many ways that individuals can live, togetherShow MoreRelated Improving the Educational System Essay1568 Words   |  7 Pagesabilities, interests, social and cultural background, gender, prior attainment or aspirations. As future teachers, we need to know the aspects of society, so that we can ensure that each one of our students is successful and achieves his or her potential through the education provided. In this paper, I will be using the articles from the Social Class/Race and School Finance section of the class to evaluate the effects of social stratification, cultural capital, and social reproduction, school financingRead MoreArticle Analysis Savage Inequalities Written By Jonathan Kozal Essay1709 Words   |  7 Pagesplaces where social inequalities should be equalized, where the advantages or disadvantages that children experience in their homes and families should not determine what happens to them in school-in essence, that school is a place where children should have equal chances to make the most of their potential.† (Inequality) The 1991 article Savage Inequalities written by Jonathan Kozal highlights the fact that every person is entitled to the right to receive quality care and education. Kozal, revealed