28 Pages Posted: 30 May 2017
This case is used at the Darden School of Business in the inventory module of the "Financial Reporting" course elective, but it would also work well at the advanced undergraduate level. Through five phases, students first become familiar with core terminology and concepts before examining various situations—from what to make of an annual report footnote disclosure and balancing the pros and cons of using LIFO versus FIFO cost flow assumption to examining misreported inventory and inventory write-downs.
Rev. Dec. 10, 2014
Judy Gent was a driven person who had a knack for numerical analysis, deductive reasoning, and quick insights. She also had a desire for maintaining as many career options as possible for as long as possible. Thus as a forward-looking young professional, she had both the CPA and CFA professional certifications in her sights. The CPA exam, as well as Level 1 of the CFA exam, was on her spring schedule, and she had begun her preparation with the resolute dedication that she was always able to muster when she saw hard work and accomplishment on the horizon. One of this week's topics slated for her review was the financial reporting of, and the accounting choices available for, corporate inventories. For most people, she guessed the topic would not hold much attraction, but she knew there were some nuances and interesting aspects of the topic to be explored. It was 9:30 a.m. Saturday. She had already gone for a run, showered, eaten, walked the dog, and set out the materials for her review. She would tackle her review in five phases.
During the week, Gent had assembled materials from her undergraduate days, various online exam study sites, and notes given to her by some of her slightly older friends who had already taken the exams. She had synthesized all of it, and she wanted to succinctly and expertly answer some fundamental background questions pertaining to the topic of inventories in the first phase of study she had set up for herself. The initial questions for which she wanted to be sure she had the comprehensive answers:
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Keywords: financial reporting, inventory, FIFO, LIFO, cost flow, disclosure, write-down, annual report
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