VAR » Topics » 3. CHANGE IN METHOD OF ACCOUNTING FOR INVENTORIES

This excerpt taken from the VAR 10-K filed Dec 13, 2005.
2. CHANGE IN METHOD OF ACCOUNTING FOR INVENTORIES

Prior to October 2, 2004, the Company accounted for U.S. inventories of Oncology Systems using the LIFO method. All other inventories were carried at the lower of cost or market (realizable value) using the FIFO or average cost method. Beginning October 2, 2004, the Company changed its accounting for Oncology Systems’ U.S. inventories from LIFO to FIFO because the Company had experienced relatively stable inventory costs (i.e., little to no inflation) over the last several years; therefore, the use of LIFO to match current costs with current revenues had no significant impact on the Company’s operating results

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

that would have been reported using FIFO. In addition, the Company believed changing to FIFO would enhance the comparability of its financial statements with those of its industry peers. In accordance with APB No. 20, Accounting Changes, the consolidated financial statements of prior years have been retroactively adjusted to apply the new inventory valuation method and accordingly, retained earnings as of September 27, 2002 has been increased by $10.5 million as a result of adjusting the inventories from their LIFO cost to FIFO cost, net of the corresponding impact on deferred tax assets. This accounting change did not have any effect on net basic and diluted net earnings per share for fiscal years 2004 and 2003. This accounting change on net earnings as previously reported for fiscal years 2004 and 2003 are as follows:

 

 

Fiscal Years Ended

 

(In thousands)

 

2004

 

2003

 

Net earnings:

 

 

 

 

 

As previously reported

 

$

167,243

 

$

130,888

 

Effect of change in accounting for inventories, net of taxes on earnings

 

444

 

(533

)

As adjusted

 

$

167,687

 

$

130,355

 

 

This excerpt taken from the VAR 10-Q filed May 9, 2005.

3. CHANGE IN METHOD OF ACCOUNTING FOR INVENTORIES

 

Prior to October 2, 2004, the Company accounted for U.S. inventories of Oncology Systems using the LIFO method.  All other inventories were carried at the lower of cost or market (realizable value) using the FIFO or average cost method.  Beginning October 2, 2004, the Company changed its accounting for Oncology Systems’ U.S. inventories from LIFO to FIFO because the Company has experienced relatively stable inventory costs (i.e., little to no inflation) over the last several years; therefore, the use of LIFO to match current costs with current revenues had no significant impact on the Company’s operating results that would have been reported using FIFO.  In addition, the Company believes changing to FIFO would enhance the comparability of its financial statements with those of its industry peers.  In accordance with APB No. 20, Accounting Change, the consolidated financial statements of prior years have been retroactively adjusted to apply the new inventory valuation method and accordingly, retained earnings as of October 1, 2004 has been increased by $10.4 million as a result of adjusting the inventories from their LIFO cost to current FIFO cost, net of the corresponding impact on deferred tax assets.  This accounting change also increased or (decreased) previously reported net earnings by $0.4 million, $(0.5) million and $1.1 million for fiscal years 2004, 2003 and 2002, respectively.

 

This excerpt taken from the VAR 10-Q filed Feb 8, 2005.

3. CHANGE IN METHOD OF ACCOUNTING FOR INVENTORIES

 

Prior to October 2, 2004, the Company accounted for U.S. inventories of Oncology Systems using the LIFO method.  All other inventories were carried at the lower of cost or market (realizable value) using the FIFO or average cost method.  Beginning October 2, 2004, the Company changed its accounting for Oncology Systems’ U.S. inventories from LIFO to FIFO because the Company has experienced relatively stable inventory costs (i.e., little to no inflation) over the last several years; therefore, the use of LIFO to match current costs with current revenues had no significant impact on the Company’s operating results that would have been reported using FIFO.  In addition, the Company believes changing to FIFO would enhance the comparability of its financial statements with those of its industry peers.  In accordance with APB No. 20, Accounting Change, the consolidated financial statements of prior years have been retroactively adjusted to apply the new inventory valuation method and accordingly, retained earnings as of October 1, 2004 has been increased by $10.4 million as a result of adjusting the inventories from their LIFO cost to current FIFO cost, net of the corresponding impact on deferred tax assets.  This accounting change also increased or (decreased) previously reported net earnings by $0.4 million, $(0.5) million and $1.1 million for fiscal years 2004, 2003 and 2002, respectively.

 

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