Hi
I work for a manufacturing firm that holds reasonably significant amounts of gold and silver raw materials and work in progress. I'm aware of the usual "lower of cost or NRV" for the valuation of inventories, but is there any scope or provision for the valuation of gold and silver under current market rates (less any potential costs associated with sales of the inventory)?
IAS 2 two does make a provision (2.3) that covers minerals, but I wasn't sure if this would apply to precious metals. I'd also be interested in what UK standards and GAAP says on the issue.
Thanks
Neil
Replies (3)
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Do you mean can you carry it at n.r.v regardless of what it cost?
If so the answer is no. SSAP 9 is the place to look. Lower of cost and n.r.v is and always has been the rule.
I can't imagine why you would want to anyway. Unnecessary acceleration of tax liabilities is one of many good reasons for not doing so
Part manufactured items are not the same as raw materials
There is a potential issue with part manufactured goods incorporating raw materials, if the sale value of the finished product is not correlated with the value of the raw materials of which they are made.
Otherwise the lesser of NRV and cost will still link the accounts valuation of unprocessed raw materials to the market prices for gold and silver at the balance sheet date.
Montrose
Because
You are holding it as stock not as an investment that is why you are getting confused.
Also once it goes into the goods, look at the overhead absorbtion rate to value the finished goods stock. Thats where you may have missed some stock value.
But then...what do I know...