ASC 330 Inventory

The term inventory embraces goods awaiting sale, goods in the course of production, and goods to be consumed directly or indirectly in production. This definition of inventories excludes long-term assets subject to depreciation accounting, or goods which, when put into use, will be so classified. The fact that a depreciable asset is retired from regular use and held for sale does not indicate that the item should be classified as part of inventory. Inventory cost in a manufacturing enterprise includes both acquisition and production costs. The merchandising entity purchases inventory for resale to its customers. The manufacturer buys raw materials, and processes those raw materials using labor and equipment into finished goods that are then sold to its customers. In a periodic inventory system, inventory quantities are determined by physical count. Generally, in order to obtain an accurate measurement of inventory quantity, it is necessary to determine when title legally passes between buyer and seller.