I am wrong???

katsutlieff

More than willing to accept I am but I have a feeling I am not.

It's the year end at work and I am doing the closing stock figures to send to the accountant. I spoke with my manager on Monday as I wanted to clarify how the stock take had been done previously as it is very vague and misses out a lot of our main lines within the shop.

He informed me that anything with a shelf life off last than two weeks is not accounted for. I am very unsure about this mainly as this 'rule' incorporates the majority of our goods and our best sellers. He says that he was told by his accountant that this is the way to do it because if he goes bust next week the stock in question has no realisable value. My argument is that according to IAS 2 stock is valued at the lower of cost or realisable value. I can not find any rule for perishable goods

I have made a note of all the perishable goods just in case

Dcollins

Have a look at part 1, paragraph 1 of SSAP 9, www.frc.org.uk I use UKGAAP only, so this is where I'd look, but maybe there's a similar clause in IAS.

I'd be inclined to consider whether there's a certain proportion of stock that won't be sold, and can be written off (ie. no reasonable expectation of sufficient revenue to cover costs), but presumably most of it will be sold before the 2 weeks is up, therefore contibuting to the company's future earnings, and so should be included on the balance sheet.

So I'd agree that you're right to pick up on this.

katsutlieff

Thank you DCollins it's as I thought.

How can you reasonably write off what is half your stock on the premise that you might go bust so it might not have a value. Think I might have to speak with the accountant and find out what his take on it is, not sure why he would have suggested that this is okay

Monsoon

Surely if the busienss is a going concern, there's no need to make a provision for going bust.

JodieR

I'm with monsoon - the accounts are prepared on a 'going concern' basis and therefore the stock should surely be valued at an appropriate value. If you were to sell the business then you wouldn't just give away all the fresh stock for free would you?