JUNE 10-12, 2004, BELONGS TO WORLD PORK EXPO. THE DAY BEFORE BELONGS TO YOU AND PORKSHOP.2004

The clichés "best ever" and "new and improved" sometimes appear to be flung about in ads and promotions as casually as shop cloths in a machine shed.  But if you read our March newsletter, you may recall my describing PORKSHOP.2004's developing agenda as, well, the best ever!  No cliché here!  Each new seminar excels because SeRVware advances yearly to embrace ongoing improvements in farm financial management.  When you offer ag's best integrated management software, especially in financials, and it grows better every year, your training effort has to be equally superior.
    Now in its 12th year, PORKSHOP – the only independent seminar at WPE that accents financial management – will take you in June through a half-day's intensive instruction, reviewing some new and exciting things along the way.  Here're a few highlights:

•	Making better decisions through integrated information systems.
•	Quick-start, strong-finish SOPs for managerial accounting.
•	From PigWINGS (new) to full-course Windows breeding herd management.
•	Real-time growth and cost modeling and monitoring.
•	National Animal ID standards.
•	Dinner, keynote address, panel presentation and Q&A .

    Does this mean there's no place for you if you've never attended a previous PORKSHOP?  Absolutely not!  You'll take home practical ideas you can put to use for immediate benefit.  Plus you'll mingle with ag consultants and producers of your own professional status.  Colleagues, prospective friends ... you'll be glad you're among them.  The time is 1:00-8:00 p.m.(12:30 p.m. registration), Wednesday, June 9th.  The place is the Holiday Inn, Downtown Des Moines.  The event is PORKSHOP.2004.  The person is you. Contact FBS at 800.437.7638 or sales@fbssystems.com to make reservations today.

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This month we examine the changes you need to make in handling inventories as you move from traditional agricultural ("Old World") financial statements to "New World" statements that follow Generally Accepted Accounting Principles.
    When applying GAAP to production agriculture, accountants turn to the manufacturing-sector for guidance.  Manufacturing inventories fall into three classifications:

•	Direct materials
•	Work in process
•	Finished goods

    Direct materials inventories are raw "ingredients" in stock waiting for use in the manufacturing process.  In production agriculture, direct materials include seed, chemicals, fertilizer and feed.  These inventories are normally valued at cost in both traditional agricultural and GAAP financial statements.
    Work-in-process inventories are all partly completed units found in production at any given point in time, e.g. cars on an assemble line.  The agricultural equivalent of WIP inventories consists of growing animals and crops.  Few farming operations today calculate and report true WIP.  Instead, they rely on "quick and dirty" surrogates.
    In cropping operations, that surrogate is the "(Cash) Investment in Growing Crops" line found on most agricultural balance sheets.  It's an easy value to determine–just total up the cost of the crop inputs "in the ground" at the time of the statement.  Unlike true WIP, though, Investment in Growing Crops fails to account for the labor and indirect costs (such as fuel, repairs, depreciation and rent) also invested in that growing crop, therefore understating assets and overstating these expenses in the accounting period.
    Corporate livestock firms already account for WIP, although most use historical cost estimates based on weight or days-on-feed rather than monitoring actual group-cost variances.  Family operations (and their lenders) are even less informed, usually basing livestock inventories on purely arbitrary "market" values.  WIP calculation for livestock is much more complex than for crops, because of daily, rather than seasonal, activities and the challenges of capitalizing development costs for replacement breeding animals and gestating and lactating "pre-weaned" animals.
    Finished-goods inventories are goods fully completed but not yet sold.  Harvested crops in storage are the best example of agricultural finished goods.  Feeding livestock, though, only achieve the "finished goods" status on the day they are loaded on the truck heading for the processing plant.  Nearly every agricultural financial statement reports these inventories at current market value.  The "New World" approach follows a nearly twenty-year-old document published by the American Institute of Certified Public Accountants entitled, Statement of Position 85-3.  It concludes with principles for valuing work-in-process (#38) and finished goods (#39) inventories:

38.	All direct and indirect costs of growing crops should be accumulated and growing crops should be reported at the lower of cost or market.
39.	An agricultural producer should report inventories of harvested crops held for sale at (a) the lower of cost or market or (b) in accordance with established industry practice, at sales price less estimated costs of disposal, when all the following conditions exist:

	•	The product has a reliable, readily determinable and realizable market price.
	•	The product has relatively insignificant and predicable costs of disposal.
	•	The product is available for immediate delivery.

    In other words, work-in-process must be reported at lower of cost or market, finished goods may be reported at lower of cost or market as at sales price less estimate cost of disposal.  The major challenge is that whether you choose to report inventories at cost or lower of cost or market, you must be able to determine your work-in-process costs.  That's why we emphasize managerial accounting as the first step in moving our clients to "New World" financial reporting.

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FBS Systems announces Daryl Ellis, a face familiar to many FBS clients, as software trainer-consultant.  The scope of his work is to assist office staffers, information managers, and CPA accountants to better understand and more fully utilize the FBS software.
    "I've wanted to do this for some time-help other FBS users on a consistent basis by passing along what I've learned, " says Ellis. "  I have struggled with many of the setup and implementation issues of the FBS software, but hopefully my experiences will be a tremendous asset in helping others' in their FBS implementation."  Daryl is willing to travel to both clients' or accountants' homes or offices, and/or consult by phone.  He welcomes users of all experience levels.
    Daryl has spent 10 years as a financial controller/information manager with Jorgensen Land & Cattle, a large diversified operation (crops, cattle, and hogs) in Ideal, SD.  He will remain with Jorgensen's, but will now share his time equally with FBS.
    Daryl's 10 years' experience with our software preeminently qualifies him, notes Norm Brown, FBS president.  "He has seen our software evolve over the decade, culminating in e.CLIPSE," says Brown.  "He's advised us soundly in critical occasions and taught by example at seminars.  There's no one better equipped."
    Daryl grew up in eastern Wyoming in a production agriculture environment.  He holds BS and MS degrees in agricultural economics from the University of WY, and Texas A&M University, respectively.  If you desire more information or would like to engage Daryl's services, please contact Norm Brown at 800.437.7638 ext 101 (norm@fbssystems.com) or Daryl at 605.842.3217 ext 24 (daryl@jorgensenfarms.com).
    Daryl's services are NOT part of FBS' Technical Support or TiMEsavr agreements.

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sales@fbssystems.com
800.437.7638