By Stephanie Elsen
Professionals from the Farm Financial Standards Council are answering questions about ag financial matters (non-tax related). Here is a question that was recently submitted.
QUESTION
“My question pertains to death loss at a cattle feed yard. Cattle are purchased by lots and accounted for by lots. There is a typical amount of death loss, of course, in each lot. In general, no adjustment is made for normal death loss. In other words, the cost of those cattle and the feed they consumed up to death remains in the lot until sales occur. In a year where death losses are extraordinary (say 20% rather than the normal 2-7%), does an adjustment to inventory need to be made when there is still significant equity in each individual lot? When doing a lower of cost or market analysis (with the cost of the deads still included in the inventory cost), the market value still exceeds the cost. ”
ANSWER
The Guidelines don’t specifically speak to this issue, but Steve Severe the CFO of Padlock Ranch in Ranchester, WY and a member of the Farm Financial Standards Council Technical Committee, provides the following guidance.
"In my experience, I have always left the death loss with the lot until the lot is closed out (even if that closeout crosses over year-end). The decision to treat them on a lot basis conforms with GAAP. Where the cost for the lot, including the deads, is less than market value, that would give me comfort to leave it unadjusted.”
Farm Financial Standards Council
Click Here to Email Your Questions or email FFSC@redwingsoftware.com with a subject line of “Questions for the FFSC”. The FFSC will select questions to answer on this blog.
By Stephanie Elsen
Professionals from the Farm Financial Standards Council are answering questions about ag financial matters (non-tax related). Here is a question recently submitted by Travis F. Thanks for submitting your question, Travis!
QUESTION
“My question pertains to the reporting of current and non-current portions of non-current liability on a balance sheet. Is a loan with monthly payments treated differently? That is, for a monthly-payment loan, does one still include only the upcoming 12 principal payments for said loan under current portion of non-current liability?”
Thanks, Travis F.
ANSWER
The current portion of a non-current liability (a debt with a repayment term longer than one year) is the amount of principal that is due to be repaid within 12 months of the date of the balance sheet. If the balance sheet is dated January 1st, 2014 then the current portion would be the principal due in 2014 regardless of the frequency of the payment (monthly, quarterly, etc.).
Farm Financial Standards Council
Click Here to Email Your Questions or email FFSC@redwingsoftware.com with a subject line of “Questions for the FFSC”. The FFSC will select questions to answer on this blog.