Fixed asset or finished goods?

Mazza

Hi everyone,

Apologies if this seems like a silly question but I was hoping someone could give me some guidance.

The company I work for manufactured a display kitchen to use in the Grand Designs Show. We have the display now fitted into our reception area.

Our accountant advised us to treat it as finished goods. I was hoping that someone could advise me if this is the correct way to treat it?

I'm not trying to disprove my accountant or anything like that but my thinking is that the display should be treated as a fixed asset and depreciated over it's 2 year lifespan (it cost over £15000 to make).

I suggested this to my boss who said we would need an invoice for it to be treated as an asset????

I think the factor that is throwing me a little is that we manufactured the display ourselves, does this make a difference? Afterall an improvement to a building (using employees as labour) would be treated as capital expenditure wouldn't it?

Sorry again if this sounds dumb!

Clairey

Hi there

I have to agree with yourself, the display is not a finished good as you have no anticipation of selling it and therefore it can't be classified as stock. I would agree that its a non current asset and should have a depreciation value over at least the 2 years you suggested.

Claire x

welshwizard

Remember that categorising it as part of your closing stock means that it affects your profit and, therefore, corporation tax whereas the non current asset route doesn't hit your profit does it?

Personally, I would go with you and the non current asset option as this reflects the use of the asset as a part of the business in just the same way as fixtures and fittings etc.

PGM

welshwizard wrote: »

Remember that categorising it as part of your closing stock means that it affects your profit and, therefore, corporation tax whereas the non current asset route doesn't hit your profit does it?

I don't do much tax. I can't remember if you include closing stock as an allowable tax expense or not? I'd guess at yes, even though its not included as a cost in the P&L.

As for capitalising it, you'd include 25% (or so) WDA.

Mazza

Thank you so much for your help guys.

x