Hi,

My company is in the retail business of selling watches of a particular brand. We are the sole distributors for our country. We have a centralized warehouse and several showrooms spread across the country. My question is:

We have been following the periodic inventory system all these years. Now all of a sudden our auditors are asking the managemet to change our inventory system to the perpetual type of inventory management. If the management agrees to the auditors demands, I, as a programmer, have a hard time ahead revamping my entire software to the perpetual inventory system.

I'd like to know, given my company's operation style, outlined above, does my company really needs to follow the perpetual inventory type? We have, so far, not had any complaint whatsoever in our current style of operation. Do we really need to change?

Guidance will be greatly appreciated.

Regards
Shabbir

What your auditors suggested is violating the U.S. Generally Accepted Accounting Principles(GAAP) for Consistency and Comparibility.

I would use the same inventory system unless there is a good reason to change it.