Charity Shop

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bloobuoy75
bloobuoy75 Registered Posts: 16 New contributor 🐸
Hi All,

I'm in the process of completing a set of accounts for a charity that runs a shop in town. One of the Trustees pointed out that the charity has benefited from a fair amount of goodwill (mainly in terms of donated stock) and asked whether it should be valued and shown as an asset on the Balance Sheet. Does anyone have any experience or thoughts on this? Any views would be greatly appreciated.

Thanks

Bloo

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  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
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    That's a good question. I have no experience of this, but don't we go back to the old rule of valuing at the lower of cost or valuation, so that would make the value zero???!! Just a view!
  • Bookworm55
    Bookworm55 Registered Posts: 479 Dedicated contributor 🦉
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    bloobuoy75 wrote: »
    Hi All,

    I'm in the process of completing a set of accounts for a charity that runs a shop in town. One of the Trustees pointed out that the charity has benefited from a fair amount of goodwill (mainly in terms of donated stock) and asked whether it should be valued and shown as an asset on the Balance Sheet. Does anyone have any experience or thoughts on this? Any views would be greatly appreciated.

    Thanks

    Bloo


    I think you're in danger of using 'goodwill' to mean several different things.

    I don't know how charities account for donated stock, but there must be rules for it.

    But goodwill in the accounting sense is to do with purchasing other organisations, and is totally seperate. Goodwill in the everyday sense is not valuable in accounting terms, is it?

    What exactly was the Trustee referring to?
  • bloobuoy75
    bloobuoy75 Registered Posts: 16 New contributor 🐸
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    Bookworm55 wrote: »
    What exactly was the Trustee referring to?

    The Trustee said to me something along the lines of 'Over the period we've traded we've build up a fair amount of goodwill from the public. Shouldn't this be shown as an asset on the balance sheet." He also wanted to capitalise a £200 sign depreciate over 4 years.

    My response to him was similar to yours Bookworm55 in that Goodwill is only really calculated for acquistions. I did say that I would look into whether we could put in a valuation for stock, which I presume is what he was meaning.
  • stevef
    stevef Registered Posts: 258 Dedicated contributor 🦉
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    Goodwill from the public is different to the accounting concept of goodwill.

    all stock held needs to be valued and carried in the balance sheet, whether you have actually paid for it or not. The items need to be valued at fair value (the value that the shop would normally buy the items in for), the stock account debited with that value, with the offsetting credit against donations.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    stevef wrote: »
    all stock held needs to be valued and carried in the balance sheet, whether you have actually paid for it or not. The items need to be valued at fair value (the value that the shop would normally buy the items in for), the stock account debited with that value, with the offsetting credit against donations.

    I have never known a charity shop account for stock in that way, but it has been a long time since I have dealt with the accounts of a charity shop.
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    "all stock held needs to be valued and carried in the balance sheet, whether you have actually paid for it or not. The items need to be valued at fair value (the value that the shop would normally buy the items in for), the stock account debited with that value, with the offsetting credit against donations."

    I stand to be corrected but I too am not aware of stock being valued in that way either. I've not come across to any source including the SORP suggesting (For Charities) diversion from the principle of lower of cost or net realisable value. Cost includes all that's associated with it.

    I've heard of valuing the contributions (CFDG Press release) of volunteers but not valuing donations.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    My boyfriend and I donated some clothes and books to a charity shop today.
    They asked if we were taxpayers and if we would gift-aid our donation.

    That leads me to believe that they do somehow value the donations. Whether they can gain the gift-aid at the point of donation or the point of sale, I don't know.
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    If you look up what gift-aid is you may decide that you didn't understand the question.
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    If you look up what gift-aid is you may decide that you didn't understand the question.

    That's a bit rude to a respected poster!

    I have read a report recently that charity shops are asking you to gift aid your donations (I think it was in accountancy age) as a way of generating more income. They take the selling price (if I remember rightly) and treat that as the amount donated and gift aid it. The article was about how that might make the donor liable for any problems with the donated item and that the donor then might decide to keep the proceeds and the charity couldn't do anything about it.

    The HMRC link is here:

    http://www.hmrc.gov.uk/charities/gift_aid/rules/retail.htm

    I think that is what they were doing monsoon
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    "If you look up what gift-aid is you may decide that you didn't understand the question."
    "That's a bit rude to a respected poster!"!

    I'm sorry with your reading! of it Bluewednesday I'm never knowingly rude.
    The question is about stock valuation.
    I'll follow your link to see if there is anything different for charities vis a vis stock valuation.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    Your reply suggested Monsoon had no idea what he/she was talking about when quite clearly he/she did.

    Knowingly or not, I think you now have egg on your face.
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    I now looked it up and I don't think it is an authority for charities to value donations at sale price and show that it in the balance sheet as such.
    I don't engage in rude conversations Dean you may want to look in the mirror.
  • burg
    burg Registered, Moderator Posts: 1,441 mod
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    I don't engage in rude conversations Dean you may want to look in the mirror.

    Dean may well come across as rude sometimes. However on this occasion this is not the case and it is yourself that has!

    Jenni did not indicate that she knew the answer at all. She merely expressed an opinion in order to try and help the OP. She clearly states that she is unsure of her answer.

    Many people have been driven off here from these types of comments. It is something that has quietened down over the past few months. Most of us would prefer it to remain this way.

    We are all on here to seek and give advice, the main aim of which is to be constructive not destructive.

    In my opinion an apology is owed to 'Monsoon'.
    Regards,

    Burg
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    I now looked it up and I don't think it is an authority for charities to value donations at sale price and show that it in the balance sheet as such.

    Monsoon never suggested it was.
    I don't engage in rude conversations Dean you may want to look in the mirror.

    I am well aware that I was being rude. Quite why you think you were not is beyond me.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Sorry for any confusion. Should have indicated I was going off on a tangent. I do that sometimes :lol:

    What I didn't say was that my little anecdote leads me to believe some kind of valuation may go on. Haven't got a clue to the answer of the OP.

    BW thanks for the link, I will have a read.

    Thanks for sticking up for me folks, it's very appreciated but don't let this thread turn into an argument on my account :0)

    Hasan don't worry about it but I might kick your butt next time, providing I've elaborated on my tangents properly ;-)

    Jenni
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    Thank you all,
    Dean "I am well aware that I was being rude. Quite why you think you were not is beyond me."
    Very simple Dean because I was not. There has to be intention which you say you had and which I don't have. I would say you owe me an apology.
    Burg "Dean may well come across as rude sometimes. However on this occasion"
    It seems even though there may not have been a "this occassion" you decided it should supersede all else.
    Everyone including me is entitled to express an opinion to say that someone "may not have understood the question"
    "We are all on here to seek and give advice, the main aim of which is to be constructive not destructive" That's what I do, may be you too should consider offering an apology.
    The question is about valuing the donated stock.
    "That leads me to believe that they do somehow value the donations".
    I followed the link and I don't think it is an authority to value donated stock at a fair value and showing that in the balance sheet with a corresponding entry to the revenue.
    The link is about retail gifting and what goes with it.
    Monsoon thanks again for your constructive contribution.
    Providing what you say I would be the first to agree but sorry can't see myself ever being knowingly rude.
  • burg
    burg Registered, Moderator Posts: 1,441 mod
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    It was not the 'May not have understood the question' it was the 'if you look up what gift-aid is then...' that was rude!

    Anyway as Jenni has pointed out lets move on
    Regards,

    Burg
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    There has to be intention which you say you had and which I don't have.

    Fortunately, rudeness is not a criminal offence and hence no need for there to be guilty intent as well as a guilty act.

    Some people are oblivious to their rudeness.

    I am not and therefore apologise to you Hasan.

    I can't promise I won't be rude again tho!

    ;)
  • Hasan.Ahmet
    Hasan.Ahmet Registered Posts: 87 Regular contributor ⭐
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    Burg you picked half a sentence only;
    "If you look up what gift-aid is you may decide that you didn't understand the question."

    Granted that tone of what's written when read may very often depend on the reader's reading/mind, I can read that 100 times and provided that I read it in neutral mode I can't see any rudeness.
    I don't know if that's being oblivious to being rude or being well mannered for suggesting not jumping at someone's throat before at least questioning what mode something's written in.
    I don't seek promises if against people's nature Dean.
    Thank you for not apologising, let's move on.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    I can't see any rudeness.

    Really? Yikes.
    I don't know if that's being oblivious to being rude

    Yes.
    or being well mannered

    In election year we call that 'spin'.
    Thank you for not apologising

    I did. And it still stands.
    let's move on.

    Again, no promises..

    ;)
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