O'Reilly logo

Interpretation and Application of UK GAAP: For Accounting Periods Commencing On or After 1 January 2015 by Steven Collings

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 18Inventories and Work-in-Progress

  1. Introduction
  2. Measurement of Inventories
  3. Cost of Inventories and Work-in-Progress
  4. Cost Methodologies
  5. Consignment Inventories
  6. Disclosure Requirements

Introduction

Many companies in the UK and Republic of Ireland have inventories (stocks) and work-in-progress (WIP) in their balance sheet (statement of financial position) at the year-/period-end. Accounting for such assets can cause significant complexities and, as is usually the case for WIP, involves a large degree of estimation on the part of management. Auditors are particularly concerned with material amounts of inventory and WIP largely because of the impact that such valuations can have on both the profit and loss account and balance sheet of the entity. Manipulation of such figures can have dramatic effects on a company's reported results and whilst such practices are relatively rare they have been proven to exist and cause severe distortions in a company's gross profit margins and balance sheet position.

Inventories are dealt with in Section 13 Inventories of FRS 102. Whilst this is a relatively short chapter it covers some vital principles that accountants need to be aware of, as well as additional disclosure requirements over and above those of the previous UK GAAP. The scope section of Section 13 confirms that inventories are assets that:

  1. Are held for sale in the ordinary course of business (in other words they are not being used in the business),
  2. Are in the process of production ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required