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Josiah McCormick Finance

Manufacturing Costs

Asked on Nov. 2, 2015

I sometimes struggle deciding when to put items below and above the line. Currently I have a number of administrative managers below the line (CFO, COO, etc), but have production managers above the line. Is there any best practices or guidelines that I should be aware of?

Answers

Jeff McGlaughlin Corporate Controller • November 12, 2015

Inventory should be recorded as "the sum of applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location."

The GAAP definition is intentionally vague. The closer the person is to touching the product, the easier it is to defend having their cost above the line. As long as you are reasonable and, most importantly, consistent in what you put above the line and below the line, you will be fine.

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