How long is the operating cycle of Williamette Valley Vineyards?

Oregon has the third most wineries in the United States; only California and Washington have more wineries. Williamette Valley Vineyards, Inc. (NASDAQ: WVVI) is one of these Oregon wineries and is publicly-held. Williamette Valley Vineyards produces and sells several types of bottled wines under its Williamette Valley Vineyards label, including Pinot Noir, Chardonnay, Pinot Gris, Rose, and Riesling.

There are several steps in winemaking. The first step is to grow or purchase the grapes. Williamette Valley Vineyards grows its own grapes. The next step is to harvest the grapes. Williamette Valley Vineyards harvests its grapes once a year, typically in October. It also purchases grapes from selected suppliers as needed.

Harvested grapes are weighed and undergo a quality assessment to make sure the grapes meet all quality standards. The grapes are then crushed. The grape skins will be immediately removed if making a white wine; otherwise the grape skins are included in the fermentation process. The crushed grapes will be left to ferment for about 10 days to one month or more. After the clarification step of filtering out the solids, the wine will be aged in bottles, oak barrels, or a stainless steel tank.

At Williamette Valley Vineyards, bottles of wine made from a particular grape harvest will be available for sale to consumers between five months and two years after the date of the grape harvest.

(A shout-out to my colleagues at the 2017 Summit in San Antonio for suggesting this blog post – thank you!)

Questions

1. What is an operating cycle?
2. How long do you think Williamette Valley Vineyards’ operating cycle is? Why?
3. If a particular vintage of wine will be ready to be sold in 18 months from the date of grape harvest, would Williamette Valley Vineyards be likely to classify that vintage as current assets or long-term assets? Explain.
4. Why does it matter whether an asset (or liability) is classified as current or long-term?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

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

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