Finished Goods

Category

Balance Sheet

Units

Currency

US-GAAP elements

InventoryFinishedGoodsInventoryFinishedGoodsNetOfReserves

Reference

Regulation S-X Rule 5-02.6 (Inventories); ASC 330

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Finished goods are completed products a company holds and has ready to sell to customers. For a manufacturer they are the last of three inventory stages, after raw materials and work in process. For a retailer or distributor, which buys products ready to sell, nearly all of its inventory is finished goods, often called merchandise.

Finished goods are carried at cost, which for a manufacturer includes the materials, labor, and factory overhead absorbed in making them. If their expected selling price falls below that cost, the carrying amount is written down.

Regulation S-X Rule 5-02.6 asks companies to state separately, where practicable, the major classes of inventory, naming finished goods, inventoried costs on long-term contracts, work in process, raw materials, and supplies. The breakdown usually appears in an inventory footnote rather than on the face of the balance sheet. In XBRL filings, finished goods before valuation and LIFO reserves are tagged InventoryFinishedGoods, and the carrying amount after reserves is tagged InventoryFinishedGoodsNetOfReserves.

Inventory is measured under ASC 330. Companies using FIFO or average cost carry it at the lower of cost and net realizable value, while those using LIFO or the retail method apply the older lower of cost or market test. Companies on LIFO sometimes cannot practically assign LIFO amounts to each class, and Rule 5-02.6 lets them show the classes on another cost basis and deduct the difference as a single adjustment. Some companies also combine finished goods with work in process into one figure.

Analysts watch finished goods for signs of demand. A build-up of completed product that outpaces sales can mean weakening orders, and it often comes before discounting or inventory write-downs. A rise in raw materials, by contrast, can reflect stocking up ahead of expected demand. Comparing finished goods with work in process and raw materials across several periods helps separate a deliberate build from goods that are not selling.