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Politics : Formerly About Advanced Micro Devices
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To: i-node who wrote (438661)12/6/2008 5:05:56 PM
From: tejek  Read Replies (1) of 1574292
 
Internally, they can cost inventory any way they want to -- that is, for manufacturing cost accounting. But for financial reporting purposes, legacy costs must flow through just as other direct labor costs do.

I don't know where you got the "rent on a building" thing; this is not direct labor cost or for that matter, labor cost at all -- it is usually G&A but could conceivably be reported elsewhere in a business this size.

And legacy costs are not direct labor costs either. How you treat things when putting the company's finacial sheets together is purely an accounting practice. I mean what's 'Goodwill'? Can you touch it...can you eat it? Of course not. Its an accounting term made up to cover what is an intangible. Would we compare GM's goodwill to TM's we would find it lacking. Toyota has a much better rep in this country and probably in the world. Do we deny GM a loan because its goodwill is not as good? You might try but I suspect you won't get very far.

Now GM has much worse legacy costs than TM.........at least here in the US. That's because it has many more years of retired employees. Its a problem that has to be offset in some way because it puts GM at a cost disadvantage when selling its cars. Just like with goodwill, you don't turn down help to GM because it has higher legacy costs but you find a way around the problem. You find a solution that neutralizes that cost. It will take the cooperation of mgmt and the union to make it happen.
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