LIFO FIFO AND Asset Capitalization

Paper Summary:

This is a paper about asset valuation. We are assuming that we have a start up Retail Company that sells computers parts and accessories. The company inventory policy is to use the class FIFO "First In First out" (or LIFO) as a valuation method for inventory. Also this company uses the capitalization policy to determine the type of items that need to be capitalized and the threshold of the capitalization. The paper lists justifications for each of the policies and to show how the policies will assist the company in meeting its goals. The paper also includes a discussion of alternative methods of valuations and why those methods were not chosen

From the Paper:

"It is important for a company to follow a uniform policy with respect to the acquisition capitalization management and disposition of equipment and other capital assets for financial statement purposes. Assets acquired by a company are either expensed or capitalized. Companies develop specific guidelines about which purchases of assets will be expensed and which must be capitalized. Typically a company will develop a formula that will be used to determine which asset acquisitions are to be capitalized. The variables that are considered in determining whether or not to capitalize an ..."

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