What does Home Depot’s 2015 Form 10-K communicate about its inventory?

Source: Wendy Tietz, 9/22/2015

Home Depot (HD) is a retailer of home improvement and construction products. Home Depot is currently the world’s largest home improvement retailer with revenues exceeding $83 billion in its fiscal year ending February 1, 2015.

The most commonly used inventory valuation methods are first-in first-out, last-in first-out, and average or weighted average cost. See the excerpts to follow from Home Depot’s 2015 Form 10-K: its Consolidated Balance Sheets 2015 Excerpt and a section from its Notes to Financial Statements (page 35 – 36).

Questions

1. Which method does Home Depot use to value its inventory?
2. What is shrink and how can a company prevent it?
3. What is the main difference between the FIFO, LIFO, and weighted average cost inventory valuation methods?
4. What benefits would using the FIFO method for inventory valuation provide for Home Depot?

Instructor Resources

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• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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