Accounting Case

CHARLIE CORP

Memorandum

To: Charlie Corp Accounting Files

From: Richard Gardner-Controller

Date: 3/5/15

Re: Accounting for the gypsum inventory at its selling price

Facts

Charlie Corp (the Company) mines, transports, and sells quarried gypsum to building materials manufacturers. Recently, Charlie Corp extracted 100 kilograms of gypsum from a leased mine. Per FASB Accounting Standards Codification (ASC) topic 330-10-35-16(b) (Inventory-Overall), the Company is examining whether to utilize an accounting method that carries gypsum inventory at its selling price. Overall, the gypsum market is quite lively, yet stable, and one could assume that quoted market prices are generally obtainable.

Issue(s):

1. Could gypsum inventory be carried at its selling price on the books of Charlie Corp?

Analysis of Issue 1: Could gypsum inventory be carried at its selling price on the books of Charlie Corp?

The guidance directly above ASC 330-10-35-16, ASC 330-10-35-15 explains exceptions to the lower of cost or market inventory method included below. The initial guidance included in ASC 330-10-35-16 is helpful to understand the issue at hand. Charlie Corp is evaluating whether the appropriate accounting treatment for its gypsum inventory would be to carry the inventory at its selling price per ASC 330-10-35-16(b):

>    Stating Inventories Above Cost

Currently Viewing:

330 Inventory

10 Overall

35 Subsequent Measurement

General

> Stating Inventories Above Cost

35-15     Only in exceptional cases may inventories properly be stated above cost. For example, precious metals having a fixed monetary value with no substantial cost of marketing may be stated at such monetary value; any other exceptions must be justifiable by inability to determine appropriate approximate costs, immediate marketability at quoted market price, and the characteristic of unit interchangeability.

Currently Viewing:

330 Inventory

10 Overall

35 Subsequent...