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Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Inventories are stated at the lower of cost or market. The majority of inventory is valued based on standard costs, which approximate average costs, while the remainder is principally valued on a first-in, first-out basis. Cost standards are revised at the beginning of each fiscal year. The annual effect of resetting standards plus any operating variances incurred during each period are allocated to inventories and recognized in cost of sales as product is sold.

Source: Emerson Electric Co., Annual Report


Inventory Disclosure

Emerson Electric Co., Statement of Financial Position, Inventory

USD $ in millions

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Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013 Sep 30, 2012
Finished products 560  382  680  741  678  747 
Raw materials and work in process 1,136  826  1,167  1,316  1,217  1,378 
Inventories 1,696  1,208  1,847  2,057  1,895  2,125 

Source: Based on data from Emerson Electric Co. Annual Reports

Item Description The company
Finished products Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Emerson Electric Co.'s finished products declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Raw materials and work in process The aggregate carrying amount as of the balance sheet date of items held by the entity which are partially completed at the time of measurement and unprocessed items that will go through the production process and become part of the final product. Includes supplies used directly or indirectly in the manufacturing or production process. This element may be used when the reporting entity combines work in process and raw materials into an aggregate amount. Emerson Electric Co.'s raw materials and work in process declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Emerson Electric Co.'s inventories declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.