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Stock valuation finished goods

Valuation of finished personalised goods to companies

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Hi  I have a client who produces personalised goods for companies, pens, mousemats etc. All stocks are currently being valued at cost of item (no finishing added) and the direct labour and additional materials has historically been written off in month. Now we are at year end, making a potential loss and the balance sheet showing as 100% "raw" stock  - when I think about 2/3 of it should have a proportion of Direct labour, printing etc added to its value. The companies they are dealing with have ongoing contracts for these items .

Is there any reason why we cannot now revalue the balanse sheet stock to add back the cost of finishing from the PnL?

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By Paul Crowley
24th Nov 2020 20:43

Quote:

Hi  I have a client who produces personalised goods for companies, pens, mousemats etc. All stocks are currently being valued at cost of item (no finishing added) and the direct labour and additional materials has historically been written off in month. Now we are at year end, making a potential loss and the balance sheet showing as 100% "raw" stock  - when I think about 2/3 of it should have a proportion of Direct labour, printing etc added to its value. The companies they are dealing with have ongoing contracts for these items .

Is there any reason why we cannot now revalue the balanse sheet stock to add back the cost of finishing from the PnL?

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By Paul Crowley
24th Nov 2020 20:45

Really you have a client?
Why Anon?

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Hallerud at Easter
By DJKL
24th Nov 2020 20:51

Cost of inventories
13.5 An entity shall include in the cost of inventories all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present location and condition.

FRS102

https://www.frc.org.uk/getattachment/69f7d814-c806-4ccc-b451-aba50d6e8de...(March-2018).pdf

Methinks you have been incorrectly valuing stock for years, subject of course to:

13.4 An entity shall measure inventories at the lower of cost and estimated selling price less costs to complete and sell.

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Replying to DJKL:
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By johnt27
25th Nov 2020 09:12

Which, if that's the case, there's a prior period error, which I'd guess would be material enough to require correction. Unless, of course, the accounting policy says we value stock at raw material cost...

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