International accounting standards 6 Flashcards
accounts payable (znaczenie)
rachunki do zapłacenia
Goods included in inventory (znaczenie)
towar ujęty w inwentarzu
goods included in inventoryL
- A company recognizes inventory and accounts payable at the time it controls the asset.
- Passage of title is often used to determine control because the rights and obligations are established legally
passage of title (znaczenie)
przeniesienie tytułu (prawa?)
Special issues (examples)
- Goods in transit
- Consigned goods
- Sales with repurchase agreements
- Sales with rights of return
consigned goods (znaczenie)
przekazane towary (z pokwitowaniem)
sales with repurchase agreements (znaczenie)
sprzedaż z przyrzeczeniem odkupu
Goods in transit:
- Purchased goods not yet received
- Sold goods not yet delivered
- Goods in transit should be included in the inventory of the company that has legal title to the goods.
- Legal title is determined by the
terms of sale (e.g. FOB destination)
Consigned goods:
- To hold the goods of other parties and try to sell the goods for them for a fee, but without taking ownership of the goods.
- Many car, boat, and antique dealers sell goods on consignment
- Until sold, goods are included in the inventory of the seller (consignor), not the middle-man (consignee)
period costs (znaczenie)
koszty pośrednie produkcji
Product costs (znaczenie)
Costs directly connected with bringing the goods to the buyer’s place of business and converting such goods to a salable condition.
Cost of purchase includes all of:
* The purchase price.
* Import duties and other taxes.
* Transportation costs.
* Handling costs directly related
to the acquisition of the goods
Period costs:
Costs that are indirectly related to the acquisition or production of goods.
Costs not included in inventory:
- abnormal waste
- storage costs (do not increased the cost of inventory)
- administrative overheads unrelated to production
- selling costs
- foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a foreign currency
- interest cost when inventories are purchased with deferred settlement terms.
Inventory costs (znaczenie)
koszty magazynowania
storage costs (znaczenie)
koszty magazynowania
Cost Flow Methods
metody przepływu kosztów
Items that are not interchangeable
- specific costs are attributed to the specific individual items of inventory
interchangeable (znaczenie)
zamienne
Items that are interchangeable
- FIFO
- weighted average cost
- LIFO (forbidden in international accounting standards
First-in, First-out
- Costs of earliest goods purchased are first to be
recognized in determining cost of goods sold - Often parallels actual physical flow of merchandise
- Companies determine cost of ending inventory by taking unit cost of most recent purchase and working backward until all units of inventory have been costed
Avarage- cost
- Allocates cost of goods available for sale on basis of weighted- average unit cost incurred
- Applies weighted-average unit cost to units on hand to determine cost of ending inventory
last-in, first-out
- Costs of latest goods purchased are first to be recognized in determining cost of goods sold
- Seldom coincides with actual physical flow of merchandise (Rzadko pokrywa się z rzeczywistym fizycznym przepływem towarów)
- Exceptions include goods stored in piles, such as coal or hay (siano)
Balance sheet effects:
- A major advantage of the FIFO method is that in a period of inflation, costs allocated to ending inventory will approximate their current cost
- A shortcoming of the average-cost method is that in a period of inflation, costs allocated to ending inventory may be understated in terms of current cost
Tax effects
- Both inventory and net income are higher when
companies use FIFO in a period of inflation - LiFo results in lower income taxes (because of lower net income) during times of rising prices
- Average-cost method results – in fact – the average
numbers, between FiFo and LiFo
Inventory Errors: common cause and effect
- Failure to count or price inventory correctly
- Not properly recognizing the transfer of legal title to goods in transit
- Errors affect both the income statement
and the statement of financial position
Cost of goods sold=
beginning inventory + cost of goods purchased - ending inventory = cost of goods sold
Income Statement Effects:
- Inventory errors affect the computation of cost of goods sold and net income in two periods
- An error in ending inventory of current period will have a reverse effect on net income of next accounting period
- Over two years, total net income is correct because errors offset each other
- Ending inventory depends entirely on accuracy of taking and costing inventory
computation of cost of goods cost (znaczenie)
kalkulacja kosztu własnego sprzedaży
Statement Presentation:
- Statement of Financial Position - Inventory classified as current asset
- Income Statement - Cost of goods sold subtracted from (odjęty od) sales
- There also should be disclosure of (ujawnienie) major inventory classifications basis of accounting (cost or LCNRV) costing method (FIFO, or average-cost)
write-off (znaczenie)
odpisanie wartości zapasów
When the value of inventory is lower than its cost
- Companies must “write down”
inventory to its net realizable value - Net realizable value: Amount that company expects to realize (receive from the sale of inventory)
- Example of conservatism
Inventory management is a double-edged sword:
- High Inventory Levels - may incur high carrying costs (e.g., investment, storage, insurance, obsolescence, and damage).
- Low Inventory Levels – may lead to stock-outs and lost sales
stock- outs (znaczenie)
wyczerpanie
Inventory turnover
Inventory turnover measures the number of times on average the inventory is sold during the period.
Inventory Turnover = Costs of goods sold/ average inventory
Days in inventory
Days in inventory measures the average number of days inventory is held
Days in inventory = Days in year (365)/ inventory turnover
