Kobyashi Moru reports its inventory, fixed assets, depreciation and cost of good

Question

Kobyashi Moru reports its inventory, fixed assets, depreciation and cost of goods sold on a current value basis (fair market value on the date of the financial statements).

Such accounting violates the cost principle of US GAAP. There is a disclosure of the pertinent facts stating this in a footnote on the key financial statements.

Prepare the following paragraphs that include the appropriate language.

I need to write a qualified opinion paragraph and an adverse opinion paragrah with the information above. Having trouble finding the proper wording

Explanation / Answer

Financial statements made available to individuals outside of the company (external f/s) represent highly aggregated information. Operating expenses on the traditional external income statement are classified by function, e.g., manufacturing, administrative, selling. Expenses on an income statement used for management decision-making may be classified by behavior, i.e., by the way they behave with changes in activity level. Balance sheet assets are a mix of values: historical cost (land), depreciated historical cost (buildings and equipment), historical cost or lower of cost or market (inventory), and current market value (some investments in financial securities). Not all of a company

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