Goods in transit and costs to be included in valuation

Hello,

First of all, thanks a lot to Open tuition and you specially. I will be affiliate very soon, as I passed my lasts exams on December, and it is thank to your site.

Not an exam question, but I think you will like a real business life question. 🙂

I have a discussion concerning goods in transit at my office today.

Concerning inventories, IAS2 allows to include costs incurred in bringing the inventories to their present location and condition. This includes transport, taxes, customs costs, labeling costs, etc.

The question is what to include in goods in transit ? I consider that we should not include any cost we have not incurred yet. For me it is clear, following the principle of accrual accounting, that we can not include, for example, in goods in transit valuation the customs taxes if the goods have not gone yet through custom clearance.

However, there is quite a lot controversy on the subject here, as other people consider it is a cost it is going to be incurred by sure and including it in goods in transit valuation makes it easier to manage in our IT systems (that otherwise, it will have to follow up someway the different stages of cost input, instead of be based in only one standard cost that include everything).

I’m almost sure of my point of view, but I would like to have your opinion on the subject (not legal binding, I know! 😉