Client Understanding

Client Understanding Paper

Nicole D Flynn

Acct/541 Accounting Theory & Research

Kim Swallom-Gil

29 July 2013

Chief Executive Officer

XYZ Holdings

From: Nicole Flynn

Subject: Clarification Letter

Dear Mr. Smith:

 One of the key pillars in which our organization is based is on customer satisfaction as well as understanding in the matters related to the services we offer our clients. It has therefore come to my attention that in our past correspondence, we may have asked for great amount of information whose immediate significance and relevance may not be so clear to most of our clients. The particular information sourced for pertained to four key accounting areas that were adjusting lower cost of market inventory on valuation, capitalizing interest on building construction, recording gain or loss on asset disposal and adjusting goodwill for impairment. In lieu with the Financial Accounting Standard Board (FASB),which is basically a regulation oversight body for audit and accounting firms, there exists procedures on how to address these four issues. We hope that you will find this correspondence both informative and helpful in our future business engagements.

1.      Adjustment of lower cost of market inventory on valuation

You may be aware that the goods and products that produced for sale in your fiscal year but remain unsold by the end of 31 December are automatically regarded as inventory. The inventory will also include any goods that were in the production phase by the end of the stipulated period. For a manufacturing company like yours, inventory is very important and is significant to you in two main way: first inventory is what forms the working capital of any manufacturing company which constitute the asset base. Therefore to keep track of assets it is necessary to consider inventory. It is also important to make inventory valuation to ascertain a company’s net income. It is...