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In accounting, lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory. Normally, ending inventory is stated at historical cost. However, there are times when the original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value.
In nonprofit accounting, an "operating reserve" is the unrestricted cash on hand available to sustain an organization, and nonprofit boards usually specify a target of maintaining several months of operating cash or a percentage of their annual income, called an operating reserve ratio.
FIFO and LIFO accounting are methods used in managing inventory and financial matters involving the amount of money a company has to have tied up within inventory of produced goods, raw materials, parts, components, or feedstocks. They are used to manage assumptions of costs related to inventory, stock repurchases (if purchased at different ...
Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, commonly known as FAS 133, is an accounting standard issued in June 1998 by the Financial Accounting Standards Board (FASB) that requires companies to measure all assets and liabilities on their balance sheet at “fair value”.
Revaluation Reserve is treated as a Capital Reserve. The increase in depreciation arising out of revaluation of fixed assets is debited to revaluation reserve and the normal depreciation to Profit and Loss account. Selection of the most suitable method of revaluation is extremely important. The most used method is the appraisal method.
Accounting standards enable hedge accounting for three different designated forex hedges: A cash flow hedge may be designated for a highly probable forecasted transaction, a firm commitment (not recorded on the balance sheet), foreign currency cash flows of a recognized asset or liability, or a forecasted intercompany transaction.
A reservation price can be used to help calculate the consumer surplus or the producer surplus with reference to the equilibrium price. The reason why consumers are able to experience a surplus is due to single pricing, which put simply is the same price being charged to every consumer at a given level of output. Some buyers are therefore ...
Calculating option prices, and their "Greeks", i.e. sensitivities, combines: (i) a model of the underlying price behavior, or "process" - i.e. the asset pricing model selected, with its parameters having been calibrated to observed prices; and (ii) a mathematical method which returns the premium (or sensitivity) as the expected value of option ...