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Intra Group Inventory Transfer

Transferring inventory internationally at moving average cost between two group entities

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Just looking for some advice on transferring inventory. We hold electrical equipment which we buy wholesale from a supplier and sell it on as it is, once purchased it is held in stock, which is valued at the moving average cost i.e. we buy 10 items at £10 each and 10 items at £5 each giving a cost of sale upon dispatching one item of £7.5 (the majority of items are at £10 each as we need to buy a certain amount to benefit from the reduced price). We are a group subsidiary. On various occasions we need to transfer stock to our parent company which is a seperate legal entity in another country. Ignoring VAT and considering the no gain no loss rule, should the stock be transferred at the moving average cost of £7.5 per item and then a contra invoice raised for the same amount to offset it so net amount is zero? Currently we have a moving average which is slightly less than the £10 cost say £9, they argue it should be at the £10 cost as that's what we buy the majority of our terminals at unaware of the moving average implications we have, resulting in dr 9 cr 10, I argue it should be invoiced to us at the same cost of 9 so dr 9 cr 9 so zero gain and zero loss but they don't seem to understand how it could be £9 when "we always pay" £10 which is correct? Thanks

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By paul.benny
01st Dec 2020 21:31

What 'no gain no loss rule' would that be?

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By Anonymous.
01st Dec 2020 21:35

Is this really a confidential matter justifying the use of Anonymous post?

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By Paul Crowley
01st Dec 2020 21:51


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By tom123
02nd Dec 2020 08:50

What is the contra you are talking about?

You raise a sale invoice (for whatever value),
They have a purchase invoice.

Presumably you run intercompany accounts in both entities, which you should match at group level, (ie equal and opposite).

You may have currency issues to deal with, I suppose.

When you make the sale, you presumably have a process to recognise your cost of sales - be that automated or whatever.

This cost of sales should probably be separated out in your ledger and marked as interco.

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