Client Understanding Paper

Client Understanding Paper

As an accountant it is important that the accountant consult, prepare, and examine financial records and transactions appropriately to stay within "Generally Accepted Accounting Principles". Also the financial records must be precise and as an accountant I will guide this company in the right direction to remain compliant. In addition to providing this company with the appropriate guidance, I will explain in detail how these concepts and principles need to be applied. I will discuss the adjusting of lower cost or market inventory on valuation, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment.

Adjusting Lower Cost of Market

Adjusting your inventory is vital in this continuous changing market because of advances in technology and the demand of new technology from the consumer. As your Accountant I will analyze your current inventory to make sure you are as profitable as possible and refrain from holding inventory. In most cases inventory is being held in warehouses because of the cost that you have placed on those items. I will take a look at those items to ensure that they are price correctly, if not I will recommend adjusting those prices. "Many accountants have advocated valuing inventories at market because they believe that current assets should reflect current values. This might add to the information content of working capital, but to date the doctrine of conservatism has been seen as overriding the advantages claimed by current valuation advocates" (Schroeder, Clark, & Cathey, 2011, pg. 268). When the cost of inventory has surpassed the estimated value, it needs to adjust to correspond to market value that will benefit your company and value your inventory. If this move is not made this will affect the bottom line, the company may hold on the inventory, price it significantly wrong, or have an oversupply of products and materials. This affects the efficiency of the company; therefore, I will evaluate the company inventories and use the lower of cost or market adjustment (Schroeder, Clark, & Cathey, 2011).This process can be used on each item or a specific area depending on the market value. Once I have identified the adjustments and made the changes the loss will be recognized in the incoming income, which will also decrease the inventory.

Capitalization on Interest

Capitalization of interest on building construction is another area that is vital. The FASB will allow capitalization on interest if the actual amount purchased and the interest rate is lower of the interest cost or avoidable cost. Patel (2012), "ASC 835-20 states that institutions are required to capitalize the interest cost incurred during the acquisition process or construction of the asset. The capitalized interest would be added to the historical cost of the asset, and therefore depreciate over its useful life" (New Building Capitalization of Interest). To capitalize on the interest on construction the asset cannot be in use for its purpose and it must be in undergoing the process to be ready for use. Also these assets must be constructed by the company for the purpose of the company itself. The company must also take into consideration of assets that cannot be capitalized such as, assets that have been completed and are currently in service. Assets that are constructed by the company and not being used by the company currently or in the near future cannot be capitalized. These assets cannot be reported on the balance sheet as well. Also if the company intentionally postpones the progress of the asset