Definition

Stocks(English inventories) - assets intended for sale or resale, as well as assets in the form of raw materials and materials intended for use in the production process. Inventory accounting is governed by IAS 2 Inventories.

Reserve valuation

Under this accounting standard, inventories must be valued at the lower of cost of inventories or estimated net realizable value.

The cost of inventories includes acquisition costs, processing costs and other costs associated with bringing inventories to the required condition.

Acquisition costs include the actual purchase price of the inventory, import duties, non-refundable taxes, intermediary costs, shipping and other costs associated with the acquisition of such inventory.

Processing costs include direct costs associated with production and overheads, including depreciation, management and administrative costs, that are associated with the production of inventories.

Other costs are included in the cost only if they are directly related to bringing stocks to the desired state. The following expenses are not included in the cost of inventories, but are recognized in the period in which they are incurred:

Excess losses of raw materials and materials, as well as labor and other production costs;

Storage costs other than those required in the production process;

Selling costs.

The fair value of inventories is the amount for which an inventory could be exchanged in a transaction between knowledgeable and willing parties.

Cost calculation methods

The cost of inventories should be determined using the first-in-first-out FIFO method or the weighted average cost method. Moreover, the method chosen by the company should be applied to all stocks that have the same characteristics of use. The FIFO method stipulates that inventories bought or produced first will be sold or put into production first. The weighted average cost of inventories is determined by calculating the average cost of all batches of similar inventories.

When inventories are sold, their cost is recognized as an expense in the period in which the revenue is recognized. When the value of inventory falls to net worth sale, the amount of the markdown should be recognized as an expense in the period in which the markdown occurs.

IN financial reporting the company should reflect the following information: the method of estimating reserves used by the company; inventory value by item; the value of inventories accounted for fair value net of selling costs; the amount of inventory recognized as an expense for the reporting period; as well as the amount of reserves pledged as fulfillment of obligations.

Reflection of stocks in reporting

Inventories are reflected in the asset of the statement of financial position with the division into non-current (non-current inventories) and current (current inventories) stocks. Inventories are usually circulating, because expected to be consumed within a year. However, in some cases reserves can be classified as non-current assets(for example, inventory purchased for long-term construction works leading to the creation of a non-current asset).

You can correctly fill out the statement of financial position in full accordance with the requirements of IFRS in the "" program.

Last revision IAS 2 Inventories became effective in January 2005. This standard defines the basic provisions for accounting for inventories prior to the recognition of related revenue, leaving accountants to make their own choices in some cases, such as in determining the cost per unit of inventory. Accounting for inventories under IFRS should be approached with particular care, since it is inventories that are often the key factor that largely determines the cost of sales and, accordingly, net profit organizations.

Selective approach

IFRS 2 Inventories is applied to the preparation of accounting and financial reporting in the context of an accounting system for actual cost acquisitions in relation to stocks that are different:

• from work in progress (production) on construction contracts (since their accounting is regulated by IFRS I.A.S. 11 “Contracts”) and related work;
• financial instruments;
• biological assets.

The standard does not apply to the valuation of agricultural and forestry products, agricultural products after their harvest, minerals valued at net realizable value. Also, this standard does not apply to commodity brokers and traders who sell commodities to others for the purpose of generating income from fluctuations in price or margin, who measure their inventory at fair value less costs to sell.

As defined by IAS 2, inventories are assets that:

• held for sale in the normal course of business;
• are in the process of being manufactured for such sale;

• in the form of raw materials and materials intended for use in the production process or the provision of services.

Inventory includes goods purchased and held for resale. This includes any property held for resale, such as items purchased by a retailer. Inventories also include finished or work-in-progress products released by the organization (including raw materials and materials intended for further use in the production process). In addition, under IFRS 2, inventories may also include land intended for resale.

One of the fundamental points is the transfer of ownership of goods. The right of ownership is transferred at the place and at the time determined by the terms of delivery. According to international rules, there are four categories of transfer of ownership:

• Category “E” – “Shipping (Ex works)2;
• Category "F" - "The main carriage is not paid (free carrier, free alongside the ship, free on board)";
• Category "C" - "Basic carriage paid (cost, insurance and freight)";
• Category "D" - "Delivery to the border (with or without payment of duty)".

Valuation principles

Under IFRS, inventories must be valued at the lower of cost and net realizable value. It should be remembered, however, that possible net realizable value may not necessarily equal fair value (less costs to sell) because, unlike fair value, it is entity-specific.

When evaluating reserves, it should be remembered that, according to IFRS 2, it is necessary to maintain separate accounting for the names of reserves.

When calculating the possible net realizable value, the following are taken into account:

• the current market prices at which inventory can be sold at the time of settlement;
• Estimated amounts of expenses for the marketing of materials or finished products (administrative expenses are not included).

Cost Analysis

According to IFRS 2, the cost of inventories includes the costs of acquiring, processing, other costs incurred in order to bring inventories to their current state and their current location.

Acquisition costs include: the purchase price, import and other taxes (other than those subsequently reimbursed to the organization tax authorities), as well as the costs of transportation, processing, as well as other costs directly related to the acquisition of the object. Trade discounts, chargebacks and other similar items are deducted when determining purchase costs.

Processing costs include costs that are directly attributable to units of production. For example, direct labor costs. Processing costs also include the systematic allocation of fixed and variable production costs that arise from the processing of raw materials into finished products.

It should be noted that direct costs are not particularly difficult, since by definition they can be attributed directly to the cost. However, when allocating overhead costs, many questions arise: how to determine the normal level of production for a given year? Can overheads be clearly classified by function? What other (non-manufacturing) overhead costs can be attributed to the product currently in inventory? In practice, methods such as object-based and process-based cost accounting, costing of the cost of a batch of goods and the standard method of cost accounting are most often used.

Other costs under IFRS are included in the cost of inventories to the extent that they are associated with bringing them to their current location and condition. For example, it may be appropriate to include non-manufacturing overheads or product development costs for specific customers in the cost of inventory.

In some cases, the cost of inventories also includes borrowing costs (such cases are discussed in more detail in IAS 23 Borrowing Costs).

The following costs are not included in the prime cost, but are taken into account as an expense in the period of their occurrence: excess losses of raw materials, labor costs and other non-production costs; storage costs for finished products; general administrative expenses; selling expenses.

Of particular note are stocks related to the service sector. These costs mainly include salaries and other costs for personnel directly involved in the provision of services (including supervisory personnel). When accounting for inventories in the service sector, it should be remembered that salaries and other costs for sales and general administrative personnel are not included in the cost of inventories, but are accounted for as expenses in the period they occur.

Cost calculation methods

According to IAS 2, the cost of inventories can be determined in three ways:

1. A method for accurately identifying individual costs. It is used for stocks that are not fungible. This accounting treatment is suitable for products intended for special projects, whether they were purchased or produced.

2. FIFO method. Under this method, inventories are written off in the same sequence in which they are purchased. That is, the sold stocks are assigned the cost of the first purchases in time. Thus, the value of inventories at the end of the period is determined by the prices of the latest receipts.

3. The weighted average cost method, when all inventories have the same average price during the period. She is equal average cost salable goods (initial inventory plus net purchases). The LIFO method in international accounting is recognized as biased and has not been used since January 1, 2005, since during the period of price growth, of all the methods mentioned, the LIFO method gives the lowest net profit.

The organization is required to apply the same valuation formulas for all inventories that are not only similar in physical characteristics but also in the way they are used.

When choosing a method for determining the cost of inventories, it should be remembered that the FIFO method gives a higher estimate of profit, while the weighted average cost method is easier to apply and, as a rule, does not require high qualifications of accounting personnel.

In accordance with the requirements of IAS 2, all inventories that are similar in nature and use by an entity must apply the same valuation methods. For reserves of different nature, the use of different valuation methods is permitted. However, differences in the geographical location of reserves (with equal characteristics and method of use) are not the basis for the application of different methods of assessment.

After the sale of inventories, their carrying amount in without fail should be recognized as an expense in the period in which the related revenue is recognised.

Information disclosure

Information about book value inventories and the degree of change in those assets is useful to reporting users. Inventories are usually classified according to the following subgroups: "Goods", "Raw materials", "Materials", "Work in progress" and "Finished goods". Inventory of the organization of the service sector is recognized as "work in progress".

Financial statements must, in particular, disclose:

• the accounting policy adopted for estimating reserves;
• the total book value of reserves and the book value according to the classification items adopted by the organization;
• the carrying amount of inventories carried at fair value less costs to sell;
• the appropriate amount of inventory recognized as an expense during the period;
• any write-down of inventories recognized as an expense in the period;
• any recovery of the write-down of inventories;
• the circumstances that led to the recovery of decommissioned inventories;
• the carrying amount of inventories pledged as collateral for liabilities.

Elena Poletaeva, expert of the Calculation magazine

In the proposed article, M.L. Pyatov and I.A. Smirnova (St. Petersburg State University) continue to acquaint readers with the provisions of IFRS (IAS) 2 “Reserves”, highlighting the issues of the methodology for estimating reserves, the formation of reserves associated with changes in their net realizable value, as well as the recognition of their cost as expenses and disclosure of relevant information in financial statements.

The standard establishes that the cost of inventories that are interchangeable, and also do not belong to the group of inventories that are produced and intended for special projects, is necessarily determined by the FIFO (first in, first out) method or the weighted average cost method.

Methods for calculating the cost of inventories defined by IAS 2

Determining the methods of distribution between the capitalized and decapitalized costs of producing the organization's inventory in the form of finished products, depending on their nature as variable or fixed and direct or indirect, the complexity in assessing this type current assets are not limited. These issues are well known to domestic accountants and are resolved in the accounting policy by choosing the so-called method of estimating interchangeable inventories, which makes it possible to determine the valuation of inventories written off during the sale (transfer to production), groups of which have different cost (acquisition price).

Here the Standard states general rule, according to which the cost of individual items of inventory that are not interchangeable, as well as goods or services produced and intended for special projects, should be determined by individual object-specific identification of costs.

IAS 2 specifically notes that determining actual costs for specific items of inventory means that certain costs are allocated to specific inventory items. This accounting treatment applies to items held for special projects, whether purchased or manufactured. However, this definition of actual costs cannot be applied when there is a large number of inventory items that can be interchanged. In such circumstances, in order to calculated value decrease in profits (or increase in losses) as a result of decapitalization of the value of inventories, the method of selecting those items that remain capitalized as inventories in the asset balance can be used. These are the well-known FIFO and average price methods. (Cancellation in Russian accounting practice of the possibility of using the LIFO method when maintaining financial accounting is nothing else than the adaptation of Russian accounting standards to IFRS).

The standard establishes that the cost of inventories that are interchangeable, and also do not belong to the group of inventories that are produced and intended for special projects, is necessarily determined by the FIFO (first in - first out) method or the weighted average cost method.

However, under IAS 2, an entity is required to apply the same valuation formulas for all inventory items that are similar in nature and use by the entity.

For reserve items of different nature or use, different valuation formulas may be justified. For example, items used in one business segment may be used by an entity in a different way than similar inventory in another business segment. At the same time, mere differences in the geographical location of reserves (and in the corresponding tax rules) alone is not sufficient to justify the use of different valuation formulas.

The standard specifies that the FIFO method assumes that inventory items purchased or produced first will be sold first, and accordingly, items remaining on the balance sheet at the end of the reporting period were the latest purchased or produced. Under the weighted average cost method, the cost of each item is determined from the weighted average cost of similar items at the beginning of the period and the cost of the same items purchased or produced during the period. The average may be calculated on a periodic basis or upon receipt of each additional lot, depending on the circumstances of the organization.

The use of inventory valuation methods (FIFO or average prices) can change the measurement of two reporting indicators - financial result and stocks as an element of the company's current assets. Accordingly, the first indicator (profit) determines the value of the profitability ratio of the company, the second - the overall (current) solvency ratio. And here we are faced with a very important paradox. The FIFO method, in which inventories are written off in an assessment corresponding to the sequence of their receipt, in the face of rising prices, does not allow taking into account the impact on profits of inflation rates and / or rising prices in the market. We write off inventories at already "obsolete" prices that do not reflect their replacement cost, that is, the cost of resources needed to continue the company's operations in the future. Stocks, reflected at the end of the reporting period in the asset balance sheet, on the contrary, receive as close as possible to their replacement cost assessment. Since the latter is closer to a fair assessment, the FIFO method, which is focused on the informational priority of the balance sheet over the profit and loss statement, in the context of price dynamics, is actually more suitable for presenting information about the firm's solvency, compared to demonstrating the profitability of its activities.

The method of average prices allows leveling the effect of this paradox on accounting information.

Determining the Net Realizable Value of Inventories

The practice of revaluing inventories below cost, to their possible net realizable value (net realizable value), formed by the Standard, is in line with general rule IFRS requires that assets should not be carried in excess of the amounts expected to be received from their sale or use.

Under IAS 2, the cost of inventory may not be recoverable if the inventory is damaged, if it is wholly or partly obsolete, or if its selling price has declined. Also, the cost of inventories may not be recoverable if the expected cost to complete or sell them has increased.

Inventories should be written down to net realizable value (depreciated) item by item. However, in some circumstances it may be appropriate to group articles that are similar or related to each other. Such a grouping would correspond to the idea of ​​the principle of rationality.

This situation is possible when grouping stock items:

• belonging to the same range of products;
• having the same purpose or end use;
• produced and sold in the same geographical area;
• which practically cannot be evaluated separately from other items in this range.

It is not acceptable under the Standard to write off inventories based on their classification into a particular group, such as finished goods, or all inventories in a particular industry or geographic segment.

Service businesses typically must accumulate costs for each separate service, for which a separate sale price is set. Thus, the cost of each such service is reflected in the accounting separately.

Requirements for calculating the net realizable value of inventories

The standard defines a number of requirements for calculating the net realizable value (net realizable value) of inventories.

IAS 2 specifies that estimated calculations net realizable value should be based on the best evidence available, i.e., the amount of inventory held for sale at the time the calculations are made. In making such calculations, fluctuations in price or cost that are directly attributable to events occurring after the end of the period should be taken into account to the extent that such events confirm conditions that existed at the end of the period.

In calculating the net realizable value, it is also necessary to take into account the purpose of the corresponding inventory items.

For example, the net realizable value of items of inventory held to fulfill contracts for the sale of goods or services at fixed prices is based on the price specified in those contracts. If the volume of sales under such contracts is lower than the amount of inventory held, then the net realizable value of the remaining inventory is based on the general level of selling prices. As a result of the conclusion of supply contracts at fixed prices in excess of the available inventory balances, or contracts for the purchase of goods at fixed prices, it may be necessary to enter estimated liabilities (reserves) in the balance sheet in accordance with the requirements of IAS 37 " Estimated liabilities, contingent liabilities and contingent assets.

Raw materials and other materials in inventory are not depreciated below their cost if finished products, in which they will be included, will presumably be sold not below cost. However, when a decrease in the price of a raw material indicates that the cost of the finished product exceeds its net realizable value, that is, its net realizable value, the raw material is written down to its net realizable value. In such circumstances, the best available measure of its net realizable value may be the cost of replacing raw materials.

In each subsequent reporting period the assessment of net realizable value must be reassessed. In cases where the circumstances that made it necessary to write down inventories below their cost no longer exist, or where there is clear evidence of an increase in net realizable value due to a change in economic conditions, the corresponding write-down amount should be adjusted (within the limits of the original write-down) so as to reflect a new carrying amount down to the lower of cost or revised net realizable value. This situation may occur, for example, when an item of inventories that is accounted for by a decrease in its selling price at net realizable value is still in inventory in the next period and its selling price increases.

Here we should also return to the actual definition of net realizable value by the Standard we are considering.

Recall, according to IAS 2, the net realizable value of inventories is the estimated selling price in the normal course of business of the company, less the possible costs associated with their sale. Please note that this is not about the possible selling price, but about the difference between the estimated selling price of inventory and the amount of possible (expected) costs associated with their sale.

Such a determination may raise the question of whether these estimated costs should be accounted for in the inventory write-down and, if so, how to account for them.

Such expenses do not need to be shown separately. accounting records in inventory accounts. The point in determining the net realizable value is how to calculate its value in a situation requiring the creation of appropriate valuation reserves (similar to the reserves reflected in account 14 “Reserves for impairment of material assets» of the Russian Chart of Accounts).

In other words, the definition refers to the procedure for calculating the reserve, which corrects the estimate of reserves in the organization's balance sheet.

So, for example, the cost of a stock of a certain type of finished product at the end of the reporting period, calculated in accordance with the company's accounting policy in the field of accounting for production costs, is $ 300,000.

The estimated selling price of this inventory, based on the market situation at the date of reporting forming the prospects for its sale, is $280,000.

The expected cost of selling this inventory is $5,000.

Based on this data, we can estimate the net realizable value of this inventory to be $275,000 ($280,000 - $5,000).

Therefore, before drawing up the balance sheet, we must accrue a valuation reserve for this stock of products in the amount of $ 25,000 (300,000 - 275,000).

In accounting, an entry will be made on the debit of the account "Costs for the write-down of inventories" and the credit of the account "Estimated reserves".

In accordance with the principle of conservatism, the recognized cost of inventory write-downs will be recognized as an expense in the current reporting period.

The actual realized price of these inventories may differ from its estimated value, which was taken into account in calculating the net realizable value. So, suppose, in our case, the inventory was sold for $283,000.

For this amount, an entry will be made in the debit of the account "Settlements with buyers" and the credit of the account "Revenue" - 283,000.

Cost price products sold will be written off by an entry on the debit of the account "Expenses for sale" and the credit of the account "Finished products" - 300,000.

The amount of the reserve reflected earlier and recognized as an expense of the previous reporting period will be written off by an entry in the debit of the “Estimated reserves” account and the credit of the account “Sales expenses” - 25,000.

These entries will allow you to recognize in the reporting period financial results from the sale of products in the amount of $ 8,000 (283,000 - 300,000 + 25,000).

In the event that during the reporting period the stock, for which the valuation reserve was accrued in the reporting at the end of the previous period, was not sold, and at the same time its net realizable value increased, appropriate adjustments must be made in accounting. These entries should be made bearing in mind that the Anglo-Saxon accounting system, and therefore IFRS, does not use reversal entries.

Thus, suppose that the stock of finished goods, for which the allowance was accrued, was not sold during the reporting period. At the same time, its net realizable value increased to $290,000.

Based on this, estimating the reserves in the balance sheet for the current reporting date, we will have to make a debit entry to the Selling Expenses account and a credit to the Estimated Provisions account for $15,000 (290,000 - $275,000). This value will either reduce the company's expenses or be recognized as income for the current reporting period.

Recognition of inventory valuation as an expense

Recognition as an expense is the last section of IAS 2. And here it is necessary to return to the introductory provisions of the standard, indicating that the main issue in inventory accounting is determining the amount of costs to be recognized as an asset and carried forward to the following reporting periods until recognition of related revenue. Thus, the considered provisions of the Standard determine what part of the firm's costs capitalized in an asset as an estimate of its reserves should be decapitalized in the current reporting period, that is, recognized as expenses that reduce the current financial result.

IAS 2 specifically defines the rules:

• decapitalization of the value of sold inventories;
• decapitalization of provisions in case of changes in the net realizable value of inventories and losses of inventories;
• reflecting the recovery of the previously written off (decapitalized) cost of inventories.

With regard to the decapitalization of the cost of inventories sold, the Standard specifies that, after the sale of inventories, the amount at which they were carried must be recognized as an expense in the period in which the related revenue is recognised.

In accounting, this is reflected by an entry in the debit of the account “Sales Expenses” in correspondence with the corresponding inventory account (“Goods”, “Finished Goods”, etc.).

This entry is made specifically to the carrying value of inventories, regardless of whether valuation allowances were accrued when the net realizable value of inventories changed.

At the same time, according to the Standard, the amount of a partial write-down of inventories to net realizable value and all losses of inventories must be recognized as an expense in the period the write-off or loss occurs.

The Standard also specifically states that any reversal of the write-down of inventories resulting from an increase in net realizable value must be recognized as a reduction in the amount of inventories recognized as an expense in the recovery period. In other words, an excess allowance for impairment of net realizable value should be written off as a reduction in the cost of selling inventories in the current reporting period.

This is reflected by a debit entry in the Provisions account and a credit entry in the Selling expenses account.

Also, under the Standard, some inventories may be charged to other assets, such as inventory used as a component of self-produced property, plant and equipment.

Inventory allocated in this way is recognized as an expense over the life of the asset. In this case, their cost is included in the amount of depreciation charged.

Disclosure in reporting

The variability of the methods of accounting for inventories offered by IAS 2 makes it necessary for companies to include rather detailed prescriptions in the standard on what information should be disclosed by an organization applying this Standard.

Under IAS 2, the financial statements of an entity applying the standard are required to disclose:

2) the total book value of reserves and the book value according to the classification items adopted by this organization;

The Standard notes that information about the carrying amount of inventories in the structure of classification groups and the magnitude of their changes is useful to users of financial statements. The usual classification groups for inventories under IAS 2 are: merchandise, raw materials, materials, work in progress and finished goods. The inventory of a service industry enterprise can be called work in progress.

3) the carrying amount of inventories carried at fair value less costs to sell;

4) the amount of the valuation of inventories recognized as expenses during the reporting period;

Under the Standard, the amount of the valuation of inventories recognized as an expense during the reporting period, often referred to as cost of sales, consists of costs previously included in the valuation of those inventories that this moment already sold, and the unallocated portion of production overheads and excess production costs of inventories. The nature of the entity's operations may also require the inclusion of other amounts, such as distribution costs.

Some entities use this format for the income statement, which results in disclosures other than the cost of inventories recognized as an expense during the period. Under this format, an entity presents the cost structure using a classification based on the nature of the costs. In this case, the entity discloses the costs recognized as an expense of raw materials and consumables, wages and other costs, together with the net change in inventories for the reporting period.

5) each write-down of inventories recognized as an expense in the period;

6) each amount of the write-down of inventories that is recognized as a reduction in the amount of inventories recognized as an expense in the relevant period;

7) circumstances or events that led to the recovery of the written-off cost of inventories.

The reporting should also disclose the book value of inventories that serve as collateral as security for obligations.

№ 2/2008

A.N. Nikonova,
Head of IFRS department
OOO " Management Company"Russian oils"»

Some aspects of inventory accounting in Russian and international practice coincide, which makes the task of the accountant easier. Others are very different, which requires memorization. And still others differ only in nuances, which provokes confusion. Our material will help to master this section of accounting, in which we clearly showed all the similarities and differences.

What is regulated

RAS. In Russia, accounting production stocks regulate several normative documents. Among them:
- PBU 5/01 "Accounting for inventories" (approved by order of the Ministry of Finance of Russia dated June 9, 2001 No. 44n);
- Guidelines for the accounting of inventories, approved by order of the Ministry of Finance of Russia dated December 28, 2001 No. 119n (hereinafter - the Guidelines).

In addition, the issues of accounting and valuation of raw materials, materials, finished products, goods and work in progress are considered in the Regulations on maintaining accounting and accounting reports. This document approved by order Ministry of Finance of Russia dated July 29, 1998 No. 34n.

IFRS. The international rules by which the inventory of inventories is kept are summarized in a single standard. This is IAS 2 Inventories. Some rules and definitions are also contained in the Principles for the preparation and preparation of financial statements (hereinafter - the Principles).

How to recognize in accounting

RAS. PBU 5/01 says that inventories are recognized:
- raw materials, materials, etc., which are necessary in the production of goods (performance of work, provision of services);
- objects for sale;
- assets used for the management needs of the organization.

It is possible to accept inventories on the balance sheet only if the organization has the right of ownership, economic management or operational management to them. If the company does not have such a right, then the inventory should be taken into account off the balance sheet - this is directly stated in paragraph 10 Guidelines.

IFRS. According to IFRS 2, inventories include:
- goods;
- finished products;
- "incomplete".

At the same time, IFRS 2 does not contain a definition of the concept of "reserves". However, the Principles define reserves as: resources that a company controls and intends to use for a benefit. Under the same control understand the ability, firstly, to manage assets at their own discretion. And secondly, do not allow other organizations to use them. As for the right of ownership, in IFRS it does not affect the accounting for reserves.

conclusions. Key difference: IFRS financial statements reflect the value of all finished goods and work in progress. That is, regardless of ownership, assets should be recognized as reserves and accounted for on the balance sheet of the organization. While according to the current Russian "normative" the right of ownership is a prerequisite for accounting on the balance sheet.

Even according to RAS, deferred expenses are reflected in the inventory in the financial statements. IFRS does not provide for such an article in any standard. To some extent, deferred expenses in international accounting correspond to the so-called prepaid expenses, but they are reflected in the composition of advances issued. Also, Russian accountants show in stocks the value of animals, which is stipulated in IAS 41 “Agriculture”.

How to determine the cost

RAS. Russian accountants mainly reflect reserves of actual cost.

Here it should be emphasized that the actual costs, among other things, include interest on loans accrued before the inventories were accepted for accounting. And already when the reserves are taken into account on the balance sheet, interest on borrowed funds written off as other expenses. Unless, of course, the money is borrowed specifically for the acquisition of these MPZs.

However, if the company has damaged or obsolete stock, an exception is made. Then, in the annual balance sheet, the market price is shown, which is reduced by the amount of the reserve for the decrease in the value of material assets. The market price is considered to be the total price of a possible sale.

IFRS. Under IFRS 2, inventories must be measured at the lower of cost or net realizable value, which is lesser. In international practice, this procedure is followed, as it allows you to better highlight the state of affairs of the company for its management.

Under IFRS 2, cost is made up of the purchase price, import duties, taxes (other than those reimbursable), shipping and handling costs, and other acquisition-related costs. But trade discounts received after the inventory was taken into account are deducted from the cost price.

Possible net realizable value is what we used to think market price but excluding selling expenses. Decreases in the value of inventories are recorded as an allowance for impairment in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

EXAMPLE

Under the terms of the contract, the buyer receives a 5% discount from the supplier if the cost of goods purchased per month exceeds 50,000 USD. e. At the end of the month, the amount for which the goods were shipped to the buyer amounted to 54,000 c.u. e. (to simplify the example, taxes are not considered). Therefore, the amount of the provided trade discount is 2700 USD. e. (54,000 c.u. * 5%).

The acquiring company has developed an international Chart of Accounts. The accountant, focusing on IFRS 2, will make the following entries:

DEBIT 214 "Goods" CREDIT 521 "Settlements with suppliers"
- 54 000 c.u. e. - the purchased goods are credited at a price without discounts;

DEBIT 521 "Settlements with suppliers" CREDIT 214 "Goods"
- 2700 c.u. e. - reduced the cost of purchased goods by the amount of the discount.

conclusions. The approach to the formation of the actual cost of inventories, practiced in Russian accounting, has much in common with IFRS. However, you should pay attention to the following points.

First of all, while stocks are not accepted for accounting, paragraph 6 of PBU 5/01 allows you to increase their cost by the amount of interest on borrowed funds. IFRS 2 also allows this, but only under the terms and conditions provided in IAS 23 Borrowing Costs. Namely, when the preparation of stocks for use or for sale takes a long time. If IFRS statements are prepared based on Russian accounting data, this difference may lead to an overestimation of the carrying value of inventories.

Also, the MPZ can be overestimated, if you do not take into account that according to international standards discounts, chargebacks, etc. are deducted from purchase costs. Whereas paragraph 12 of PBU 5/01 does not imply such a change in the cost of inventories. Finally, according to IFRS, sales costs are deducted from the possible selling price of the inventory, which is not provided for by Russian rules.

How to write off

RAS. The same types of inventories with different costs can be written off in one of three ways, specified in paragraph 16 of PBU 5/01. Let's consider them.

1. Write-off at the cost of a unit of inventory. This method determines the current cost of inventories that cannot replace each other or are subject to special accounting. An example is precious metals and stones, radioactive substances.

2. Write-off at cost of the first in time of acquisition (FIFO).

3. Write-off at average cost. Using this method, the average cost is calculated for each type of inventory using the following formula:

Cs \u003d (Co + Sp) : (Ko + Kp),

where Сс is the average monthly cost of goods;
Co - the value of the balance of goods at the beginning of the month;
Sp - the cost of goods accepted for accounting for the month;
Ko - the number of goods remaining at the beginning of the month;
Kp - the number of goods accepted for accounting per month.

Please note: from January 1, 2008, it is forbidden to use the LIFO method in Russian accounting. This is when the cost of retiring stocks is determined by the price of the last incoming or manufactured batch.

Paragraph 78 of the Guidelines states that inventories can be written off using the FIFO method and at average cost using a weighted or rolling estimate. Let's explain. A weighted estimate provides that at the end of the month, the accountant determines the cost of all stocks retired during this time at once. Needless to say, this is a very common practice. With a rolling estimate, the cost is set each time the inventory is written off.

IFRS. IFRS 2 provides for the following ways in which inventories can be written off.

1. The method of continuous identification. It is used for stocks that are not fungible. That is, when it is known exactly which refineries remained in stock, and which were transferred to production or sold.

2. FIFO method. Inventories sold are assigned the cost price of the first purchases. That is, the cost of inventory at the end of the period is determined by the prices of the latest receipts.

3. Average cost method - when all stocks have the same average price in the period.

LIFO in international accounting was canceled a long time ago (since January 1, 2005), as it was recognized as biased. After all, during the period of rising prices of all the methods mentioned, the LIFO method gives the lowest net profit.

IFRS 2 allows to calculate average cost through periodic or continuous evaluation.

conclusions The weighted estimate under Russian standards is in line with IFRS periodic assessments. And the Russian sliding system is identical to the international continuous one. This and other coincidences allow us to conclude that the methods of writing off inventories in RAS and IFRS are generally the same.

Basic IFRS terms related to inventories

Finished goods inventory- one of the main accounts for accounting for inventory in a manufacturing company.

Stocks of materials (Materials inventory, Raw materials inventory)- an account designed to account for raw materials, basic and auxiliary materials, semi-finished products.

Stocks of work in progress, work in progress (Work in process inventory, Goods in process)- closing balance on this account characterizes work in progress at the end of the reporting period. That is, it is the total amount spent on unfinished products.

LIFO (Last-in-first-out method, LIFO)- method of inventory accounting for the last batch manufactured or purchased. Canceled since January 1, 2005 as the least objective.

Continuous inventory method (Perpetual inventory method, Continuous inventory method)- an accounting system in which the accounting department constantly monitors the availability and use of each unit of stock during this accounting period. This accounting method is best for companies that sell high-value products, such as aircraft, automobiles, jewelry, etc.

Periodic inventory method- an accounting system in which only an inventory of balances at the end of the accounting period is carried out. This information is compared with information on opening stocks and net purchases. As a result, the cost of goods sold (materials used) is determined. This system convenient for organizations that sell a large range of relatively inexpensive products.

Personal identification method, continuous identification method (Specific identification method) The accountant keeps track of each item of inventory and its value. This method is very time consuming and requires large expenditures for record keeping. Therefore, it is used in the production / sale of high-value products that are produced in small quantities (aircraft, cars, jewelry, etc.).

Weighted average cost method or Average cost method- allows you to set the unit cost of goods sold and ending stocks. It is equal to the average cost of goods available for sale (initial inventory plus net purchases).

Beginning inventory- stocks of inventory items at the beginning of the reporting period.

Inventory cost- Includes invoice price (minus discounts), shipping costs, non-refundable taxes, tariffs, insurance.

FIFO (First-in first-out method, FIFO)- inventory accounting method for the first batch manufactured or purchased. Under this method, inventories are written off in the same sequence in which they are purchased.

Net purchases- this concept is used in periodic evaluation. This indicator is calculated as follows: total amount purchases in the period take away discounts for early payment, returns and markdowns of purchased goods. Transport costs are added to the result. Net purchases, together with initial stocks, constitute the Cost of goods available for sale.

Stocks are the assets:

1) intended for sale in the ordinary course of business;

2) in the process of production for such sale; or

3) in the form of raw materials or materials that will be consumed in the process of production or provision of services.

net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs to complete production and the estimated costs to be incurred to sell.

fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The net realizable value of inventories may differ from fair value less costs to sell.

Inventories must be valued at the lower of cost or net realizable value, whichever is lesser.

Cost price inventory should include:

1. Acquisition costs inventories include the purchase price, import duties and other taxes (excluding those subsequently reimbursed to the entity by the tax authorities), as well as transportation, handling and other costs directly attributable to the purchase of finished products, materials and services. Trade markdowns, discounts and other similar items are deductible in determining acquisition costs.

2. Processing costs inventories include costs, such as direct labor costs, that are directly related to the production of products. They also include the systematically apportioned fixed and variable production overheads that arise from the processing of raw materials into finished products. Fixed production overheads are indirect production costs that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of production buildings and equipment, as well as production-related management and administrative costs. Variable production overheads are indirect production costs that are directly or almost directly dependent on the volume of production, for example, indirect costs raw materials or indirect labor costs.

The allocation of fixed production overheads to processing costs is based on the normal productivity of production facilities. Normal productivity is the amount of production that is expected to be obtained based on averages over a number of periods or seasons of operation under normal conditions, taking into account productivity losses due to scheduled maintenance. Actual production may be used as long as it approximates normal throughput. The amount of fixed overhead charged per unit of output does not increase as a result of low production or downtime. Unallocated overhead costs are recognized as an expense in the period in which they are incurred. During periods of unusually high levels of production, the amount of fixed overhead charged per unit of output is reduced so that inventories are not valued above cost. Variable manufacturing overheads are charged to each unit of output based on actual capacity utilization.

3. Other costs are included in the cost of inventories only to the extent that they have been incurred to maintain the current location and condition of the inventories.

The following expenses are not included in the cost of inventory:

1) excess losses of raw materials, labor expended or other production costs;

2) storage costs, unless they are required in the production process to move to the next stage of production;

3) administrative overheads that do not contribute to maintaining the current location and condition of stocks;

4) selling costs.

For convenience, inventory costing methods such as standard cost accounting method or retail price method, if the results of their application approximately correspond to the value of the cost.

The cost of inventories of items that are not normally interchangeable, and of goods or services produced and allocated to specific projects, should be determined using specific identification of specific costs. Specific cost identification means that specific costs are allocated to identified inventory items.

The cost of inventories should normally be determined using first-in, first-out method (FIFO) or weighted average cost method. An entity must use the same costing method for all inventories that have the same nature and use by the entity. The average value can be calculated on a periodic basis or upon receipt of each new batch, depending on the specifics of the enterprise.

The cost of inventory may not be recoverable if it becomes damaged, becomes obsolete or partially obsolete, or if its selling price decreases, or if the estimated cost of completion or estimated cost to sell increases. In this case, inventory is written down to net realizable value. Inventories are usually written down to net realizable value on an item-by-item basis. However, in some cases it may be appropriate to group articles that are similar or related to each other.

Estimates of net realizable value are based on the best available evidence of the amount that can be obtained from the sale of inventories at the time such estimates are made. Net realizable value estimates also take into account the purpose of the stock held.

Raw materials and other materials intended for use in the production of inventories are not written down below cost if the finished product in which they will be included is expected to be sold at a price corresponding to cost or above cost. However, if a decrease in the price of raw materials indicates that the cost of finished goods exceeds net realizable value, raw materials are written down to net realizable value.

In each subsequent period, the net realizable value is revalued. If the circumstances that made it necessary to write down inventories to below cost cease to exist, or there is clear evidence of an increase in net realizable value due to a change in economic conditions, the amount previously written down is reversed (i.e. the reversal is up to the amount of the original write-down) so that the new the carrying amount was the lower of cost or revised net realizable value.

When inventories are sold, the carrying amount of those inventories must be recognized as an expense in the period in which the related revenue is recognised. The amount of any markdown of inventories to net realizable value and any loss of inventories should be recognized as an expense in the period in which the markdown or loss occurs. The amount of any reversal of a write-down of inventories due to an increase in net realizable value shall be recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal is made.

The financial statements must disclose:

1) principles accounting policy accepted for the valuation of reserves, including the method used to calculate the cost;

2) the total book value of reserves and the book value of reserves by type used by this enterprise;

3) the carrying amount of inventories carried at fair value less costs to sell;

4) the amount of inventories recognized as expenses during the reporting period;

5) the amount of any write-down of inventories recognized as an expense in the reporting period;

6) the amount of any write-down reversal that was recognized as a reduction in the amount of inventories recognized as expenses in the reporting period in accordance;

7) the circumstances or events that led to the reversal of the writedown of inventories; And

8) book value of reserves pledged as security for the performance of obligations.

Information about the carrying amount by type of inventory and the extent of changes in these assets is useful to users of financial statements. As a rule, stocks are divided into the following types: goods, raw materials, materials, work in progress and finished goods. The service provider's inventory can be treated as work in progress.

The amount of inventory recognized as an expense during the period, often referred to as cost of sales, consists of those costs previously included in the valuation of inventory already sold, plus unallocated manufacturing overheads and the excess cost of inventory. The specific nature of the business may also require the inclusion of other amounts, such as distribution costs.