You are required to choose a suitable company with sufficient disclosures on inventory and write a business report to address the following two questions. You may choose the company from:...

The company which has been chosen for the discussion is A2 Milk Company Ltd. 2020 annual report of the company has been used for the analysis.
(1) Inventory disclosure
The valuation used for the inventory is lower of the cost or net realizable value. In 2020, $3,773,000 was written down from the value of the inventory and has been shown as expense. Either standard costing or weighted average methods are used to calculate costs. Standard costs are reviewed and revised to reflect the actual annual cost.
Most of the time, inventory is shown at Net Realisable Value, which is the selling price that can be raised in the normal course of the business. Cost of completion and cost of sales is estimated and deducted from the net realisable value. The estimation also includes inventory turnover which is expected in future and is held for sale and the expected selling price that can be get by the company in future when the inventory will, actually be sold. A few judgements are made on the recovery of the inventory including changes which will be used in trading and economic conditions, regulations of the specific country, estimation of the future conditions of the company and the industry.
(2) Research on the company:
As per the accounting policy maintained by the company, details are to be provided regarding the inventory. The basis of measure, methods used to add and remove inventory, loss on impairment and the reason for overstatement of inventory.
ASC 330 sets regulations for accounting and reporting including the measurement of the inventory which can be measured at lower of cost or market value or realizable value. The company has to follow these rules and regulations.
Such assets are to be classified as:
· Held to be sold in the normal course of business.
· The asset is in the process of production.
· The consumption in the production of goods or services to be available for sale.
In this company, inventory is valued at either of the cost or net realisable value. The cost of the inventory can be determined by using several methods like FIFO that is first in first out, LIFO that is last in first out, average cost, etc. Irrespective of the measures being used, there should be consistency in the method being used. The company uses standard costing method which is the difference...