- CFA Exams
- 2021 Level I
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 25. Inventories
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Learning Outcome Statements PDF Download
| 1. Cost of Inventories a. distinguish between costs included in inventories and costs recognised as expenses in the period in which they are incurred; | |
| 2. Inventory Valuation Methods b. describe different inventory valuation methods (cost formulas); c. calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems; d. calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods; | |
| 3. Periodic versus Perpetual Inventory System b. describe different inventory valuation methods (cost formulas); c. calculate and compare cost of sales, gross profit, and ending inventory using different inventory valuation methods and using perpetual and periodic inventory systems; d. calculate and explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods; | |
| 4. The LIFO Method e. explain LIFO reserve and LIFO liquidation and their effects on financial statements and ratios; f. convert a company's reported financial statements from LIFO to FIFO for purposes of comparison; | |
| 5. Measurement of Inventory Value g. describe the measurement of inventory at the lower of cost and net realisable value; h. describe implications of valuing inventory at net realisable value for financial statements and ratios; | |
| 6. Financial Analysis of Inventories i. describe the financial statement presentation of and disclosures relating to inventories; j. explain issues that analysts should consider when examining a company's inventory disclosures and other sources of information; k. calculate and compare ratios of companies, including companies that use different inventory methods; l. analyze and compare the financial statements of companies, including companies that use different inventory methods. |
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