more-arw search

Q&A Forum

What is the best mehodology of year end inventory valuation having high price volatility ?

Like inventory of commodities like gold, silver , oil etc if presuming, on book closure week price falls by 20% to recover the following week by say 15 %?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

When I was in that industry we recorded purchases at cost (segregated between a "labor" component and the value of the metal).. We sold based on a markup of the days value of the precious metal.

At period end, inventory was valued at "labor" plus its value in metal at COB.

Mark Sutherland
Title: CFO
Company: Profit By Design CFO & Controller Servic..
(CFO, Profit By Design CFO & Controller Services) |

One textbook answer is "...support exists for recording inventory at "net realizable value", even if that amount is above cost. GAAP permits this exception to the normal recognition rule under the following conditions: (1)when there is a controlled market with a quoted price applicable to all quantities, and (2)when no significant costs of disposal are involved." So you could revalue this inventory at each period end, or each time a balance sheet is produced for external reporting (and internal reporting, if desired).

257 views

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.