In July of 2015, the Financial Accounting Standards Board (FASB) issued Update 2015-11 Inventory (Topic 330), which will amend guidance within Topic 330. If you are currently valuing your inventory using a method other than Last-in, First-out, (LIFO) or the retail inventory method, you need to make sure you are aware of this update to implement and follow it. This standard was written as part of FASB’s Simplification Initiative and should hopefully simplify your valuation of inventory approach. What this update does is change the approach to value inventory from a lower of cost or market test, to a lower of cost and net realizable value approach. The following is further information on what you need to be aware of and consider when implementing this update.
Almost half of manufacturing executives are focused on demand forecasting and inventory management, which are two sides of the same coin, according to a study by Gatepoint and IBM, “Five key factors in optimizing complex manufacturing businesses.”
The challenge at all stages of the manufacturing process – from raw materials to finished goods – is having enough inventory on hand to complete orders.
Have you ever found your company in a position where you have too much of one inventory item and not enough of another? Or found your company in a position where you could not fill a parts or sale request? Or had to halt your company’s production due to a lack of inventory? If you have, a cycle count of inventory might be a process to consider.