redskins44

COGS under temporal. Should be reversed.

smuggycfa

do not think so.

FIFO - earliest piece of inventory is in COGS. So Historic Rate is the COGS rate.
LIFO - last pieces of inventory is in COGS -> so Historic Rate is the CURRENT rate.

pretty sure about this.

Please read the paragraph on pg 175 in the CFAI text ....
(3rd up from bottom of page)

CP

RepoToronto

Cheers CP, btw did you not take the level 1 in 07? I remember we discussed much level 1 stuff back then?

defour44

I've put a summary together based on my understanding of the instructions on page 175, vol2 of which rates to use when translating using temporal method, as it pertains to cost flow assumption. Can someone please advise if it's correct.

Under temporal method:

FIFO:
COGS - hist
INV - curr

LIFO:
COGS - curr
INV - hist

Avg cost:
COGS and INV - wt. avg rate

kickthatcfa

cpk123 Wrote:
-------------------------------------------------------
> Fixed Assets PPE ->
> Current Rate Method - Current Rate
> Temporal Method -> Historic Rate
>
> Depreciation:
> Current Rate Method -> average
> Temporal -> Historic
>
> Inventory
> Many variances/nuances here:
> Current Rate
> -----------------
> End Inventory-> Current Rate (On B/S0
> COGS -> on I/S -> Average Raet
>
> Temporal Method (All nuances are here)
> --------------------------------------------------
>
> Ending Inventory -> Historic Rate (also depends on
> Flow assumption)
> FIFO -> Latest inventory present in the End
> Inventory. So Historic Rate is actually the
> CURRENT Rate.
> LIFO -> Old pieces are present in Ending
> Inventory. So Historic Rate is the real HISTORIC
> Rate.
> Wt. Avg -> No issues here - use Wt. Avg Rate.
>
> COGS
> FIFO -> Old pieces have been used in COGS. So
> Historic Rate is the real HISTORIC Rate.
> LIFO -> Latest inventory present in the COGS. So
> Historic Rate is actually the CURRENT Rate.
> Wt. Avg -> No issues here - use Wt. Avg Rate.


CPK--Great summary. I agree totally. One additional point/comment. If we are given FIFO or LIFO assumption but are additionally told the inventory is purchased and sold evenly throughout the year, I think we are to use the average rate. It seems that his comment supersedes the FIFO/LFO assumption. I discovered this yesterday when doing Schweser Exam 1AM, and posted about it yesterday. Basically the average rate is used in question 16 although FIFO is given, because of the even purchase throughout the year.

yospaghetti

i think this is a good post so im bumping...does anyone disagree with my last post?

zephyranalyst

Well I just had a schweserpro question which asked

What rate do you use for inventory and COGS using LIFO under the temporal method.

Answer: Inventory and COGS should use historical rate.

Not getting the COGS answer.

ningning1984

And I just did another problem using LIFO #87466 Problem 5

This time it uses AVG.

b_sea93

bump on this--after a year of this i still am trying to figure out what to do with FIFO/LIFO + evenly purchased inventory throughout the year situation!