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Hi Mike,
I have had a disagreement with the auditors for my personal (small) retail company for years and I though you could solve the confusion for me. This is not an ACCA question so if you dont want to answer I’ll completely understand since Im sure you are very busy.Its regarding cost of inventory that is imported and the related import taxes and transport costs. My thoughts are that it is logical to value a stock item with a portion of the import tax and a portion of the transport cost however my auditor says that the invoice value must be entered (with stock items individually entered) and the import taxes and transport costs must be entered separately as 2 lump sums not apportioned to the individual stock items. The problem is that profits and closing stock valuation would be distorted. ‘My way’ of course needs much more work by way of an excel table.
If you find a minute to give me your opinion that would be great but once again if not Ill completely understand.
thanks!
LeoI can see your argument – all those costs directly involved in bringing the inventory to its present location and condition
The auditors however equally have a good point – how would you allocate transport costs and import duties in a way that is “certain” and consistent and, importantly, auditable.
It sounds to me likely that it’s going to finish up as a very arbitrary allocation and that’s not certain enough.
I think, on balance, that my sympathies are leaning towards the auditors
Probably not what you wanted to hear, sorry 🙁
Thanks for your reply!
Actually I was kind of hoping you would say that because its far far easier!
In any case, to come to correct pricing and to be able to add a profit margin I still would have to make the table to allocate/apportion the costs to each unit but thats just management accounting.
But I still dont understand the logic because in years of heavy imports the profit for the year would be very low and if the next year I have few or no imports the profit would be artificially high since the costs of the inventory are not properly matched to the period that the items are sold. I guess accounting and management accounting are two different things.
Anyway. I got my answer. Thanks again!
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