J.C. Penney And The Difference Between Cost And Retail Accounting

Anyone who has studied accounting knows that even when a management team is just trying to give the clearest possible depiction of how their business is doing (not massaging numbers or worse) there are a surprising number of judgment calls that can influence this quarter’s bottom line, and if investors don’t realize that two companies are making different choices they can be misled by a side-by-side comparison. When deciding how to handle markdowns, for instance, big box department stores like J.C. Penney Company, Inc. (NYSE:JCP) normally use the retail method while specialty retailers normally use the cost method of accounting…