It was decided in the first quarter of fiscal 2016 that Commercial Metals Company Ltd would change the accounting method it used to value its inventories. This change would be for its Americas Mills, Americas Recycling and Americas Fabrication segments. This development would see them using the weighted average cost method instead of the last in, first out method. The company applied this change in accounting principle retrospectively to all prior periods presented. Furthermore, during this first quarter, the company changed the accounting method it used to value its inventories within its International Marketing and Distribution segment; a specific identification method elected to be used rather than the first in, first out method. As this change in accounting principle was immaterial in all prior periods, it was not applied retrospectively.
Questions:
1 Why did the company apply the change in valuation method retrospectively for some of its segments but did not make retrospective changes to its International Marketing and Distribution segment?
2 What do you think is meant by the term ‘specific identification method’ of tracking inventories?