Stock Valuation

katsutlieff

I need someone to tell me whether I am going mad or not.

I am having an ongoing battle with work as to how all stock in the farm shop should be accounted for, for the purposes of the closing figures for the accountant.

I would assume that I would close the shop and count all the stock valuing it at the lower of cost or NRV. My boss only wants the non perishable items included in the valuation.

I have questioned this so many times and each time I am told that this is the way his accountant has told him to complete the stock take the perishable items aren't included because apparently if the shop went out of business these items would have no value :glare:

I have tried to explain the concept of going concern but I am banging my head. It has got to the point that I am now questioning myself. This one example is part of a long list of things that aren't accounted for properly and I am seriously considering handing in my notice. He likes having his scapegoats and I don't want to be one when HMRC comes knocking

Steve Collings

No I don't think you're going mad! I think you're spot on.

SSAP 9 does not require a valuation to be done based on whether the company might be here one minute and gone the next. The assumption that the perishable goods would have nil value if the shop went bust is a bit confusing - would another farm shop not buy the goods/would the liquidator not try to sell them to raise finances to pay off creditors? How has this assumption been arrived at ie is it "industry norm" to do this?

If the perishable goods are not included then closing stock would be understated, resulting in lower profit thus lower tax! If the accountant has advised this method of valuation, then I question the accountant's ability. The perishable goods may still have a value regardless of whether the business has ceased trading, so valuing stock on the assumption that the business MAY go under is a bit naive in my opinion.

At the end of the day you can only do what your boss wants and let him argue with HMRC if the need arises.

All the best
Steve

katsutlieff

Thank you Steve I did think I had this one right.

Monsoon

As long as you put your thoughts/ recommendations into writing, then you have covered your own back. Ultimately it's his reponsibility.

You could always do the stocktake and present the accountant with 2 stock figures, for perishable/non-perishable. Then you've done your bit and it's up to them what they do with it.