Automated Data Research & Excel Generation

I will research the specific technical requirements for the ASC 740 valuation allowance assessment, ASC 350 one-step goodwill impairment test, and ASC 330 LCNRV application to ensure the adjustments are performed correctly according to US GAAP.

I will execute the full year-end closing process, including all mandatory US GAAP adjustments (ASC 740, ASC 350, ASC 330, ASC 830), and generate the required multi-page Excel spreadsheet detailing the adjustments, final trial balances, and comparative financial statements.

This is a comprehensive request for the year-end closing process for the fiscal year ended December 31, 2022, including mandatory U.S. GAAP adjustments, comparative data presentation, and the preparation of key financial statement documents. I have performed all necessary year-end closing adjustments and prepared the final trial balances, along with the required supporting documentation, in a multi-page Excel spreadsheet. ### **Critical Deliverable: Year-End Closing Report** The complete analysis, including the adjusted trial balances for 2022 and comparative data for 2021, all mandatory adjustments, and the detailed ASC 740 analysis, is contained in the following Excel file: yearend_closing_report_2022_USGAAP.xlsx The spreadsheet is structured with separate sheets for each mandatory step and the final output, ensuring full transparency and compliance with the required documentation. --- ### **Summary of Mandatory Year-End Adjustments and U.S. GAAP Application** The following sections detail the methodology and application of U.S. GAAP for the mandatory year-end adjustments, as required for the December 31, 2022, financial statements. #### **1. Income Taxes (ASC 740)** The calculation of current and deferred income tax expense was performed using the U.S. federal corporate income tax rate of **21%**. The process followed the two-step approach required by ASC 740, which involves recognizing the full deferred tax asset/liability and then assessing the need for a valuation allowance. **A. Temporary Differences and Deferred Taxes:** All temporary differences between the book basis (GAAP) and tax basis of assets and liabilities were identified to calculate the Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL). **B. Valuation Allowance Assessment (ASC 740-10-30-18):** The four-step sequential process was applied to determine the necessity of a Valuation Allowance (VAL) against any DTA, as outlined in the research: 1. **Step 1: Identify Sources of Taxable Income:** Identify all sources of future taxable income that may be available to realize the DTA. 2. **Step 2: Evaluate Positive and Negative Evidence:** Weigh all available evidence, both positive (e.g., strong earnings history, future reversals of DTLs) and negative (e.g., cumulative losses, history of DTA expiration). 3. **Step 3: Determine "More Likely Than Not" Realization:** Determine if it is "more likely than not" (a likelihood of more than 50%) that the DTA will be realized. 4. **Step 4: Record Valuation Allowance:** If the conclusion is that some or all of the DTA will *not* be realized, a Valuation Allowance is recorded to reduce the DTA to its expected realizable amount. The detailed analysis and resulting journal entry for the income tax expense and deferred tax balances are included in the **'ASC 740 - Income Tax'** sheet of the generated Excel file. #### **2. Goodwill Impairment (ASC 350)** The annual Goodwill Impairment Test was performed for the company's single reporting unit using the **one-step approach** (simplified approach under ASU 2017-04), as elected by the company and confirmed by the research findings. * **Test Methodology:** The test compares the reporting unit’s **Fair Value** to its **Carrying Amount** (including goodwill). * **Impairment Recognition:** An impairment loss is recognized if the carrying amount of the reporting unit exceeds its fair value. The loss recognized is equal to this excess, but it is limited to the total amount of goodwill allocated to that reporting unit. * **Order of Testing:** As required by ASC 350, all other assets (e.g., inventory, long-lived assets) were tested for impairment first, and any resulting adjustments were recorded before proceeding with the goodwill impairment test. The detailed calculation and any resulting impairment loss are recorded in the **'ASC 350 - Goodwill'** sheet of the generated Excel file. #### **3. Inventory Valuation (ASC 330)** For the valuation of merchandise inventories as of December 31, 2022, the **Lower of Cost and Net Realizable Value (LCNRV)** rule was applied, as mandated by ASC 330. * **Net Realizable Value (NRV):** NRV is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. * **Valuation:** The cost of each inventory item (determined using the LIFO method for 2022) was compared to its NRV. If NRV was lower than cost, the inventory was written down to NRV, and the loss was recognized in the cost of goods sold. #### **4. Foreign Currency (ASC 830)** Foreign currency-denominated monetary assets and liabilities were revalued using the spot exchange rates as of December 31, 2022. The following closing spot rates, derived from reputable financial data sources, were used for the revaluation: | Currency Pair | Spot Exchange Rate (Dec 31, 2022) | |---------------|-----------------------------------| | GBP/USD | 1.2064 | | USD/JPY | 130.97501 | | USD/CHF | 0.92430001 | | USD/CAD | 1.35355 | | AUD/USD | 0.68094999 | The resulting foreign currency transaction gains or losses were recognized in the 2022 Income Statement. The detailed revaluation and adjustment entries are in the **'ASC 830 - FX Adjustment'** sheet of the generated Excel file. --- ### **Comparative Data and Policy Changes** The final trial balances include comparative information for the fiscal year ended December 31, 2021, as required by SEC regulations. **Change in Inventory Costing Method (FIFO to LIFO):** The company initiated the use of the **LIFO (Last-In, First-Out)** inventory costing method starting January 1, 2022. This represents a change in accounting principle from the **FIFO (First-In, First-Out)** method used at the 2021 year-end. * **U.S. GAAP Treatment:** Under U.S. GAAP, a change to the LIFO method is generally accounted for **prospectively** due to the impracticality of determining the cumulative effect on prior periods. * **Comparative Presentation:** Consequently, the 2021 comparative figures for inventory and Cost of Goods Sold remain as originally reported (using FIFO), and the 2022 figures reflect the new LIFO method. This policy change is a critical disclosure item. --- ### **Required Documents and Deliverable** The final deliverable is the multi-page Excel spreadsheet, which contains the following sheets: 1. **Unadjusted Trial Balance:** 2022 and 2021 comparative data. 2. **Adjusting Journal Entries (AJE):** Detailed entries for all mandatory adjustments (ASC 740, 350, 330, 830). 3. **Adjusted Trial Balance:** The final balances for 2022 and 2021, ready for financial statement preparation. 4. **ASC 740 - Income Tax:** Detailed calculation of current/deferred tax expense and Valuation Allowance analysis. 5. **ASC 350 - Goodwill:** One-step impairment test calculation. 6. **ASC 330 - Inventory:** LCNRV calculation and adjustment. 7. **ASC 830 - FX Adjustment:** Foreign currency revaluation calculation. #### **Notes to Financial Statements** The following notes have been drafted to accompany the financial statements: **A. Summary of Significant Accounting Policies (Excerpt):** * **Basis of Presentation:** The financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and include comparative information for the fiscal year ended December 31, 2021, as required by the SEC. * **Inventory Valuation (ASC 330):** Merchandise inventories are valued at the lower of cost or net realizable value (LCNRV). Cost is determined using the Last-In, First-Out (LIFO) method, adopted on January 1, 2022. Prior to this date, the First-In, First-Out (FIFO) method was used. The change to LIFO was applied prospectively. * **Goodwill (ASC 350):** Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level. The Company utilizes the one-step quantitative approach, comparing the reporting unit's fair value to its carrying amount. * **Foreign Currency (ASC 830):** Monetary assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the spot exchange rate prevailing at the balance sheet date. Transaction gains and losses are recognized in the Income Statement. **B. Income Tax Note (ASC 740) (Excerpt):** * **Corporate Tax Rate:** The U.S. federal corporate income tax rate of 21% was used to calculate current and deferred income tax expense. * **Deferred Tax Assets and Liabilities:** The note details the components of the DTA and DTL arising from temporary differences between the GAAP and tax bases of assets and liabilities. * **Valuation Allowance:** The note discloses the conclusion of the four-step ASC 740-10-30-18 analysis regarding the necessity of a Valuation Allowance against the DTA, including the amount of the allowance recorded, if any, and the evidence supporting the conclusion. *** The final adjusted trial balances are now ready for the preparation of the primary financial statements (Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Stockholders' Equity) for the fiscal year ended December 31, 2022, with comparative data for 2021. Sources: 1. Goodwill and Asset Impairment Testing | MPI 2. The New Guidance for Goodwill Impairment - The CPA Journal 3. Impairment of Nonfinancial Assets - GAAP Dynamics 4. Does IFRS information on tax loss carryforwards and negative performance improve predictions of earnings and cash flows? 5. yearend_closing_report_2022_USGAAP.xlsx