Inventory Reporting?

Question

Can anyone tell me the method McDonald's uses to track their inventory (LIFO, FIFO etc.)?
Here is a link to their 2006 annual report. Thanks for your help.
http://www.mcdonalds.com/corp/invest/pub/2006_Annual_Report.html

That is what I am looking at. And Although I didn't read everything word for word. I did skim over it and also did a quick search for keywords inventory, inventories, LIFO, FIFO, weighted (as in weighted average), first in, and last in. None of these turned up anything useful. Perhaps I am in too big of a hurry.

I know they are required to report, that is why I was hoping someone with more experience reading these could help me find it. The only thing I found even close was that they managed inflation in costs by having quick inventory turnover, but they would still have to have a set system for tracking inventory.

Thanks for the help though. Sorry if I am coming across blunt. I promise I am really grateful for your help.

Answer 1

You should review the foot notes of their 10-k filing. They have to disclose their accounting policies including methods for estimate. You can access this for free on the sec edgar website.

Answer 2

No, it's not reported. They disclosed inventory as "at cost, not in excess of market". Inventory is not very material in the balance sheet, so I guess they deem it not significant enough to disclose the cost formula. But seeing that it's a restaurant business, it's not unreasonable to assume that they use FIFO.
All we know is that Mcdonald's uses the JIT inventory system (Just in time) to reduce their inventory levels.

For a big chain like McDonald’s, inventory can become a complicated process, but corporate officials try to keep it as simple for restaurant managers as possible.
“Because we’re a franchise system and the level of sophistication on the [technological] systems might be different, we have an array of [ordering] systems,” Gonzalez-Mendez says. “The system of choice for us would be the automatic ordering system or the automatic replenishment system. We’ll utilize the time of our restaurant managers the least, so they can dedicate their time to attending their customers. We believe spending time placing orders or making sure that the stockroom is rotated is non-producing, so as much as we can take that away from the restaurant manager, we’re doing it.”
Ideally, Gonzalez-Mendez says, orders should be triggered when the product is rung on the register. For example, when a McDonald’s employee rings up a Big Mac, the computer tells the system exactly what products and how much of them are being sold, so that if necessary, the product can be reordered. “We try to hold our inventories as close to nothing as possible,” he says. “Obviously, we need a cushion there if we don’t want to run out of product. It depends on the order accuracy, that depends on the predictability of the product mix, and that depends on how many new products we’re getting into the system. It’s a moving target.”

Answer 3

I've worked in food service, both fast food and not. All the restaurants I've worked at have done FIFO (first in, first out).

Each night, at close, inventory is done by the closing manager- they record quantities of all the supplies and comodities. This is compared to the previous night's inventory to determine how much was used that day.

When the truck comes in, everything is recorded- what came, if anything was damaged. That information is then compared to what was ordered.

Answer 4

Mcdonalds Jit

Answer 5

Take pictures of everything when you leave. - and maybe use a current newspaper to prove these were after you moved out, and not before you moved in. Then you'll have proof of the condition of the place.