Analysis of Inventories – Module 6 – FSA – CFA® Level I 2025

Download PDF Now: https://www.finquiz.com/cfa/level-1/summary/ 2025 Prep Packages for the CFA® Program exam offered by FinQuiz Pro (notes, summaries, question bank, mock exams, and formula sheet): Level I: https://www.finquiz.com/cfa/level-1/ Level II: https://www.finquiz.com/cfa/level-2/ Level III: https://www.finquiz.com/cfa/level-3/ 0:00 – 0:30 | Introduction: Mastering Inventory Valuation An overview of why inventory valuation is a critical topic for financial analysis and for CFA Level 1 candidates, and how it reflects a company’s financial health. 0:30 – 1:00 | Financial Impact of Inventory Valuation Explains how the method used to value inventory affects balance sheet items (current assets, net income) and why accurate valuation matters. 1:00 – 1:36 | Consistency in Valuation Methods Discusses the importance of using consistent valuation methods when comparing companies and the effect on financial results. 1:36 – 3:00 | Key Cost Components Impacting Inventory Value Covers factors such as spoilage, obsolescence, insurance costs, and declines in selling prices that can lead to write‑downs and adjustments in inventory valuation. 3:00 – 4:45 | IFRS Approach: Lower of Cost or NRV Breaks down IFRS requirements for inventory valuation, explaining net realizable value (NRV) and how companies write down (and possibly reverse) inventory values under a principles‑based approach. 4:45 – 6:11 | US GAAP vs. IFRS: Write‑Downs and Cost Basis Differences Highlights key differences between US GAAP and IFRS—for example, US GAAP does not allow a write‑up once inventory is written down, which affects the reported cost basis. 6:11 – 7:10 | Impact of Inventory Write‑Downs on Financial Statements Explores how write‑downs reduce gross profit and net income, alter balance sheet asset values, and affect profitability and liquidity ratios. 7:10 – 8:20 | Industry-Specific Considerations & Active Market Pricing Discusses special considerations in industries (e.g., agriculture, mining) where inventory is valued using active market prices and how such methods affect short‑term financial results. 8:20 – 10:05 | Inventory Valuation Under Inflation vs. Deflation Compares how different valuation methods (FIFO, LIFO, weighted average) behave under inflationary versus deflationary conditions, with examples showing impacts on profitability and tax liabilities. 10:05 – 11:20 | Disclosure Requirements for Inventory Valuation Reviews how companies must disclose their inventory accounting policies, write‑downs, and significant estimates under IFRS and US GAAP in their financial statements. 11:20 – 12:05 | Essential Inventory Ratios: Turnover & Days on Hand Introduces key analytical tools (inventory turnover ratio, days on hand) used to assess the efficiency of inventory management and overall operational performance. 12:05 – 13:04 | Real‑World Analysis & CFA Exam Tips Provides practical insights and exam tips on applying inventory valuation concepts when analyzing a company’s financial health, with guidance on how these ideas appear in CFA exam questions. 13:04 – 15:00 | Recap: Key Concepts and Their Impact on Financial Health Summarizes the most important points—from cost components and valuation methods to disclosure and ratios—and reinforces how these concepts help analysts understand a company’s true financial position. 15:00 – 17:18 | Final Thoughts & Exam Preparation Tips Concludes the session with final insights on why mastering inventory valuation is essential for accurate financial analysis and CFA exam success. Includes practical advice for further practice and applying these concepts in real‑world scenarios.