LoweÃÂs Companies Inc. is a home improvement retailer offering home improvement products and services. With over 1,200 stores in 49 states, LoweÃÂs is the second largest home improvement retailer followed by Home Depot. LoweÃÂs was founded in 1946 in North Carolina. In its early years, LoweÃÂs was just a small hardware store offering a wide variety of building materials, appliances and hardware. Through the years, sales grew and Lowes began to expand. Currently, Lowe's offers thousands of products to customers to build and enhance their home.
In 2006, LoweÃÂs had to issue a restatement of their 2005 annual report. In February of 2006, the management of LoweÃÂs decided to change their method of accounting for recognizing discounts on merchandise payments received early. Prior to this change, LoweÃÂs recognized these early payment discounts by reducing the cost of sales when the product was purchased. Now, management has decided to recognize the discounts as a reduction in inventory, then as a reduction of cost of sales when the inventory is sold.
By switching to this accounting method, LoweÃÂs has realized a reduction in their total assets, retained earnings, shareholderÃÂs equity, cost of goods sold, gross margin, along with other accounts. Since realizing these differences, LoweÃÂs decided to go back to their prior yearÃÂs financial statements and restate them while modifying them in respect to their new accounting method. Another reason that LoweÃÂs has issued this restatement is to adjust the common stock amounts. In May of 2006, the board of directors approved a 2 for 1 stock split. To account for this split, LoweÃÂs had gone back to prior years statements and made adjustments to in their common share amounts.
Recently, the Emerging Issues Task Force of FASB has released Issue number 02-16, Accounting by a Customer for Certain Cash Consideration...