BEER CASKS - REVENUE OR CAPITAL EXPENSE ?

BEER CASKS - REVENUE OR CAPITAL EXPENSE ?

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Just taken on a new 'micro brewery' client. Two types of beer cask are used - plastic and metal. Plastic cost approx £25 and should last approx 2 years, metal costs approx £55 and should last 10 years +.

Not sure whether to treat these items as revenue or capital expenses.

Any (sober) suggestions ?

The brewery is only 150 yds down the road - I keep feeling strangley drawn to it .

steve hargreaves

Replies (4)

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By AnonymousUser
15th Nov 2006 17:02

Does classification matter in terms of safeguarding the asset?
Wouldn't we need to track the casks regardless of their classification? If they are treated as stock we'd still implement a system for tracking the volumes to and from customers.

Certainly returnable packaging such as beer kegs used to be classified as fixed assets when I was in practice but it's not that recent so I bow to others' superior knowledge if times have changed.

As for materiality, maybe at £55 a single cask isn't material but in total they are. Does anyone know if they're insured as a fixed asset or a stock item?

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By neileg
15th Nov 2006 13:33

Materiality
I wouldn't have though that an individual cask was of material value. I have a problem in treating immaterial items as capital, even if in aggregate, they are material. How are you going to track each cask as an individual asset?

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By AnonymousUser
14th Nov 2006 18:47

Agree and disagree with Neil
One of our sister companies uses returnable packaging which they treat as stock with any new panels / stock losses being charged to the p&l. Two years is about right and therefore I agree with Neil.

I'm not so sure about the metal casks though - wouldn't they provide an enduring benefit and therefore have to be classified as fixed assets?

Not saying I disagree with Neil but I need more convincing that this is a stock item.

Steve I don't know if they're interchangeable but if they are why would your client use plastic ones as they're more than twice as expensive?

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By neileg
14th Nov 2006 14:11

Stock
I would treat these as stock. Although a cask will have a finite life, so long as it is in good nick, it has a full value. So I'd treat these as stock items. Clearly any casks that are scrapped, stolen or otherwise lost to the business will need to be charged to the P&L. The P&L charge will be:
value at start of period + purchases - value at end of period

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