Three Little Pigs

In: Business and Management

Submitted By stevenlsj789
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s. There are four potential alternatives for dealing with the possible need to impair the value of Three Little Pigs Inc.'s inventories.

Alternative 1: Continue to carry all inventories at cost basis.
ARB28, Par.14c ?Such temporary market declines need not be recognized at the interim date since no loss is expected.?

EITF, 86-13 Discussion ?? option 28 requires inventory be written to lower of cost or market unless (1) substantial evidence exists that market prices will recover before the inventory is sold?Write down is generally required unless the decline is due to seasonal pricing fluctuation.?

ARB43, Ch.4, Par.9 ?Where evidence indicates that cost will be recovered with an approximately normal profit upon sale in the ordinary course of business, no loss should be recognized...?

If it can be determined that the depressed prices...

Case 04-4 Three Little Pigs, Inc. Three Little Pigs, Inc. (PIGS), a public entity, is a vertically-integrated provider of pork products to the wholesale and retail food service and institutional markets in the United States. The Company produces approximately 4.1 million hogs per year and processes the majority of the hogs in its own facilities. The Company also sells a portion of the hogs produced (live hogs) to outside third parties. PIGS does not have any firm commitments to sell live hogs to third parties, nor does it hedge its live hogs through commodity futures contracts. There are essentially three major categories of hog inventory—live hogs ready for sale, developing animals, and processed pork products. Farmer Joe, CEO of the Company, has represented that the processed pork product prices are sufficient to cover the costs of producing such products, i.e., the wholesale prices of processed pork products, such as loins, hams, and bacon exceed the cost to bring such products to market. As a result, management…...

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