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Listed companies inventory valuation method selected (on)

Author: WeiZhi From: www.yourpaper.net Posted: 2009-03-30 17:46:29 Read:
[Abstract] Inventories are an important part of a company-current assets is essential in the process of production and operation. Different inventory valuation method will directly affect the three financial statements, financial indicators, investment decision, financing plans, companies can also be used for tax planning, earnings management, the choice of suitable or not crucial. The day-to-day accounting of the inventory cost plan and the actual cost method. The latest corporate accounting standards require an entity using the first-in, first-out (FIFO) method, the weighted average method or the specific identification method to determine the actual cost of inventories of the abolition of the LIFO. In this paper, choice of listed companies inventory valuation method for sub-industry survey, from the last-in, first-out method of enterprises, analyzes the potential factors that affect the inventory valuation method selected, and pointed out that the last-in-first-out (LIFO) the cancellation of the law is a necessity, China's capital market will not cause a greater impact. Each enterprise should be selected according to the characteristics of their own and the industry of the new accounting method. The plan cost as a method for manufacturing enterprises are recommended.
The conclusions of this study has some reference and reference value for listed companies in the future inventory valuation method choice.
Keywords: inventory valuation method, the new accounting standards, last-in first-out method, the plan cost
Abstract
For many companies, inventory represents a large portion of current assets, and becomes one of the most necessary parts. The accounting method that a company decides to use to determine the costs of inventory can directly impact the balance sheet, income statement and the statement of cash flow. It can also affect the earning per share and other financial indices, even the investment plans. It's important for all the corporations. And since 2007, the cost of inventories is determined on the FIFO, the specific identification method or weighted average basis by the newest accounting standards, canceling the LIFO. This paper studies the choices of companies on inventories based on 2005 annual financial data of companies in stock market in China, and tries to find out potential determinants of corporate inventory accounting decisions, the reasons why the LIFO is canceled and the effect on the economics and securities markets. The findings suggest that it's necessary to cancel the LIFO. When the companies select the methods again, they must make the choices according to themselves.
Key words: inventory accounting methods, the newest accounting standards, the LIFO, standard costing
CONTENTS
Preamble ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 1
Second, the literature review ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 1
Third, the listed company inventory valuation method selected by industry statistics ? ? ? ? ? ? ? ? ? ? ? ? ? ? 2
New standards for inventory valuation method change causes and impact ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 5
(A) last-in-first-out (LIFO) method the characteristics of enterprises and dynamic analysis ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 5
(B) Case Study ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 6
(C) New Accounting Standards reason for the change and impact ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 9
Fifth, the choice of inventory valuation method ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 10
(A) a general description of the inventory valuation method to select ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 10
(B) the applicability of the planned cost method and the advantages and disadvantages ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 10
VI Conclusions and limitations ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 12
(A) Conclusion ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 12
(B) the limitations ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 12
Appendix ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 13
Source and References ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 14
First, the preamble
Enterprises are held in their daily activities according to the "Accounting Standards for Business Enterprises No. 1 - Inventories Inventories represent finished goods or merchandise for the purpose of selling in the production process of product consumption in the production process or provision of services materials and supplies. Specifically, the inventory consists of a variety of raw materials, products, semi-finished products, finished products, commodities and packaging materials, consumables, Goods on consignment.
Inventories are an important part of the corporate assets, is an important resource for economic benefits to the enterprise. Inventories to continue to buy, consumption and sales, with strong liquidity, its quantity and its value recognized (ie, inventory valuation) is essential, will directly affect the value of the assets in the corporate annual report, corporate current , late profits, the financial indicators of enterprises, enterprises operating results reflect the investment decision-making, financing, financing plan can even use the selection of different valuation methods, tax planning, earnings management, and benefit from. Various listed companies to disclose information objectively and fairly reflect the financial position, operating results has been the focus of investor attention, it disclosed the value of the assets, profits and other financial indicators impact investors confidence and further investment in the key.
There are many kinds of inventory valuation methods: specific identification method, the first-in, first-out method, the weighted average method, the weighted moving average method, LIFO, the plan cost, the price law. Canceled LIFO in the latest corporate accounting standards is a major change in the field of inventory valuation. This paper attempts to proceed from the choice of listed companies in China inventory valuation method, more than 800 companies listed on the Shanghai Stock Exchange as disclosed in the 2005 financial statements for inventory valuation method selected statistics based on sub-industry, focusing on the use of last-in, first- various enterprises of the law, through the data comparison, the potential impact of inventory valuation method selected, the change of the new standards on the business impact of new standards cancel last-in-first-out (LIFO) method of the reasons for each enterprise at the same time giving up the last-in, first- out method of inventory valuation method once again chosen to make recommendations, all enterprises should be comprehensive consideration to choose according to their actual situation. For the plans cost method for manufacturing enterprises to be recommended. The purpose of this article is to put forward reasonable proposals for the choice of the new standard inventory valuation method.
This article is divided into the following sections: The preamble to the introduction of the contents of this paper, purpose, significance; The second part is a literature review; The third part is the empirical analysis, inventory valuation method for more than 800 enterprises in Shanghai Stock Exchange statistics, observation of inventory valuation method usage in various industries; fourth part from the last-in, first-out method of enterprise start, pay attention to the latest corporate accounting standards changes in inventory valuation, including the use of the LIFO method the characteristics of enterprises and The reason for the change and the impact of motivation, specific cases, new standards; fifth part is the choice of the new accounting method to make recommendations; Part VI Conclusions and limitations in this article.
Second, the literature review
The choice of accounting method has been the focus of attention of all enterprises. Tax revenue brought by the managers always the high profits in the financial statements and reports of low-margin, low cash outflow to choose between, and this contradiction more deeply reflected in the choice of inventory valuation method. Prices continued to rise, the last-in, first-out method can make the current cost of inventories increased, lower profits, delay pay income tax, to reduce the adverse impact of inflation of the enterprise, increase stamina, improve enterprise to resist risks capacity; make enterprises of the first-in, first-out method has a higher income, enhance the confidence of investors and creditors of the enterprise, but will increase the level of corporate tax burden, may lead to excessive capital distribution, adverse long-term business-to-business. Reasonable choice of inventory valuation method has an important impact on the results of operations of the enterprise, it is at home and abroad, many scholars to study it.
First, Wang Zhuquan that the inventory valuation method to select the features to be considered inventory management requirements, corporate finance, business management and performance evaluation and other factors, any of these methods are difficult to take into account the various demands. The choice of inventory valuation method there is difficult to reconcile the contradictions. He put forward by setting the "last-in, first-out method valuation allowance" and "last-in-first-out (LIFO) method adjustment of profits account, while presentation of the results of two different inventory valuation method of accounting, the day-to-day accounting of inventory to take the first-in, first-out (FIFO) method, and then the end of the period adopt LIFO adjust them. Left just from the choice of inventory valuation method on the business results of the impact angles, to make a last-in, first-out method is the ideal method of inventory valuation. Wang Yanming, and deer away to inventory valuation method to select an example of how to choose the accounting policies. Raised when companies do not consider the tax benefits, there is the compensation plan and the company will choose the first-in, first-out (FIFO) method at the edge of defaulting on its debt; companies face greater political costs (generally larger enterprises) will select the last-in, first-out method; enterprises to consider the tax benefits, a higher proportion of managers' equity and lower financial leverage ratio will select the last-in, first-out method. Finally, the article pointed out that during the accounting policy choices, but also must consider the impact of government policies.
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