Annual Report for T-Mobile

Inventory turnover

2019 12.34x

2020 9.39x

Days Sales in Inventory

2019 30 days

2020 39 days

In 2019, the company replenished its sold inventories quicker than in 2020. It is because their 2019 inventory level is lower than in 2020. This means that in 2019, the company experienced an excess in inventory. Their inventory turnover for both years is still common relative to the industry average. Their results are 300 times lower than the industry average. Therefore, even in 2020, the company still has an inventory shortage, But the level of stock maintained is just suitable for the demand.

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Conversely, it takes for the company to replace its sold inventories is 30 days, while in 2020, it is in 39 days. If they did not reach the industry average for inventory turnover, their day’s sales in inventory results are higher than the industry average, but there is only a minimal difference. The interpretation is still in line with the inventory turnover. Some inventories are hard to sell, increasing the inventory balance in 2020.

The inventories that the company has are wireless devices and accessories. They are valued using the lower cost and net realizable value, a standard inventory valuation for its subsequent measurement. Before that, inventories are valued using the typical cost. Because the customers upgrade the purchased product, all returned devices go to the list. This is a sales return transaction, so whatever is produced will go to the inventory. Also, the company leased their devices to a third party. These leased devices will be accounted for from the list to the property and equipment. Leased instruments are returned to the company, forming part of the inventory balance. Lastly, T-Mobile has a subsidiary named Brightstar. If there is an intercompany inventory transaction between them, especially a downstream sale, the inventory will remain in T-Mobile until it is sold to a third party. The sale made by T-Mobile to Brightstar is still a sale where T-Mobile has to transfer the goods to Brightstar. Any unrealized profit can be eliminated upon consolidation. Therefore, it is Brightstar who must hold their purchased inventories from T-Mobile. The unrealized gain on the ending list due to intercompany sales will be eliminated upon consolidation. It will be considered realized if sold to a third party.

As an investor, I would like to recognize the accuracy of the amount stated in their inventory. They adhere to IAS 2, where the stocks are subsequently recognized at lower cost and net realizable value. This applies to how they manage their lists because some are returned. Returned devices are not in the same condition as brand-new devices, so they have to write down their cost according to their retail value, called net realizable value. If the company transfers the inventory sold to Brightstar, it will make a more accurate valuation of stocks. Overall, the company manages its store very well since they adhere to the standards and adhere to the demand.