Inventory gets special attention at ASA BV meeting


"You'll tend to see a higher step up with LIFO as respect to FIFO," if only because of inflationary factors, Richard Billovits told a crowded room at the Advanced BV Conference in Phoenix this morning.  It's one of the factors that can impact ultimate conclusions of value.

So can the presence of IP.  "If you've incorporated intellectual property into inventory" you're going to see variations or step up in value too.  "Think about a Ralph Lauren shirt manufactured overseas," he said.

Another factor Billovits discussed what the impact of deferred revenue is on accrual statements.  If the asset or liability is there, you have to value it under fair value requirements.  Sometimes you can use the top-down approach, which starts with market price, removes sunk costs and profit on suck costs, to arrive at the fair value of deferred value.

Another approach is bottom-up.   Here you have have the costs to fulfill the legal performance obligation, plus the profit or mark up.

Billovits told the audience that the accounting principals behind valuing deferred revenue is evolving.  The newer model has to do with the costs of transferring the asset.

 

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