Question 18Q - Intermediate Accounting (Kieso)

Question

Deere and Company reported inventory in its balance sheet as follows. Inventories $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?

Step-by-Step Solution

Answer

Additional disclosures such as inventory composition, arrangement of inventory financing, and methods used to value the inventory should be disclosed. 

Definition of inventories

Inventories are the items held at the end of the year by the business, which are unsold by the business. 

Additional reporting related to inventories

The company is required to report the composition of inventories such as raw material, finished goods, work in process inventories, etc., in the balance sheet or in the notes to the financial statements. 

Inventories purchased by financing arrangements such as related party transactions, firm purchase commitments, and loans secured by inventories should be reported in the disclosures to the financial statements. 

Methods used to value the inventory, such as LIFO, FFO, average cost method, etc., should be properly disclosed in the financial statements as disclosure.