Presentation
The Bookstore Cooperative: Textbook Travails
North American Case Research Association
(2009)
Abstract
Case Objective
The case illustrates the difficulty of inventory valuation and management in an evolving market. Students are introduced to the effects of rapid market changes on demand for textbook inventory and the effects of obsolescence on financial statements. The case details operations of a college bookstore, the Bookstore Cooperative, and focuses on valuation and timing of obsolete textbook write-downs, retail inventory accounting and flawed inventory controls. The Bookstore Cooperative director questions whether newly discovered textbook obsolescence is serious enough that board members need be apprised and whether the losses will be reported in current year financial statements. The Cooperative textbook manager is concerned with control procedures to prevent large, obsolete textbook inventories from building up again. The case objectives are: to develop a logical approach to accounting-oriented decision-making using Statement of Financial Accounting Concepts No. 2, to apply analytical auditing procedures to a business with a high level of student familiarity, and to design a set of control procedures that minimize future obsolete inventory. The case demonstrates how a client’s business and its environment affect the identification of inherent risks related to inventory. The case was written for business school undergraduate courses in intermediate accounting and auditing.
Case Synopsis
The Bookstore Cooperative, a university auxiliary running bookstore operations, was contemplating an overvalued inventory at year-end. The overvaluation was largely a result of changes in the textbook industry, including more frequent text revision cycles and increased competition from internet sellers and e-books, as well as traditional competitors. The immediate issues were to account for the valuation loss for inventory of non-returnable, obsolete books and to value the remaining retail inventory for reporting purposes. Since the non-profit employed generally accepted accounting principles, it was required to report its inventory accordingly, valuing inventory at lower of cost or market. Of long-term concern to the management of the Cooperative was the need to manage the risk of inventory obsolescence. Managers needed to assess the weaknesses in inventory management processes and develop control procedures minimizing future inventory obsolescence.
The author developed the case for class discussion rather than to illustrate either effective or ineffective handling of the situation. The case, instructor’s manual, and synopsis were anonymously peer reviewed and accepted by the North American Case Research Association (NACRA) for its annual meeting, Chaminade Resort & Spa, October 29-31, 2009. All rights are reserved to the author and NACRA. © 2009 by Elizabeth Grace.
Keywords
- textbook,
- travails,
- bookstore
Disciplines
Publication Date
2009
Citation Information
Elizabeth V. Grace. "The Bookstore Cooperative: Textbook Travails" North American Case Research Association (2009) Available at: http://works.bepress.com/elizabeth_grace/8/