The Reporting of Inventory

The reporting of inventory is especially unique because the reported balance is not as standardized as with

accounts receivable. For example, under certain circumstances, the balance sheet amount shown for inventory

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actually can reflect net realizable value. Several other meanings for the reported balance, though, are more likely.

The range of accounting alternatives encountered in analyzing this asset emphasizes the importance of reading

the notes included with financial statements rather than fixating on a few reported numbers alone. Without careful

study of the additional disclosures, a decision maker simply cannot know what Best Buy means by the $4.753

billion figure reported for “merchandise inventories.” Another company could show the identical number for its

inventory and still be reporting considerably different information.