Question

would Magazine Luiza be required or advised to include notes to the financial statement to clarify the lack of inventory listed under assets?

Answer 1

The first order of business when preparing explanatory notes is explaining, in general, the business and significant accounting policies.

Notes about valuing inventory

Companies have two inventory issues that must be disclosed in the notes: the basis upon which the company states inventory (lower of cost or market) and the method in use to determine cost. GAAP allows three different cost flow assumptions: specific identification; weighted average; and first in, first out (FIFO).

Accounting for inventory is usually addressed in whichever note gives a summary of accounting policies

So it is required to clarify the same