Abstract
Accounting for stock involves the determination of both the cost of goods sold during the period and the amount that should be carried forward in the balance sheet as stock to be matched against future revenues. This is because the determination of profit for an accounting period requires the matching of costs with related revenues. The cost of unsold or unconsumed stocks will have been incurred in the expectation of future revenue, and when this will only arise in future periods it is appropriate to carry forward this cost to be matched with the revenue when it arises; the applicable concept is the matching of cost and revenue in the year in which the revenue arises rather than in the year in which the cost is incurred.
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References
SSAP 9, Stocks and long-term contracts, Revised September 1988, para. 16.
Accounting Research Bulletin No. 43, AICPA, June 1953, Chapter 4, Inventory Pricing, Statement 1.
IAS 2, Inventories, IASC, Revised 1993, paras. 4 and 16.
SSAP 9, para. 22.
See, for example, SSAP 9, para. 1; ARB 43, Chapter 4, Statement 2; and Eldon S. Hendriksen, Accounting Theory, p. 299.
SSAP 9, para. 3.
The term ‘stocks’ as used in this Chapter, includes ‘manufacturing work-in-progress’.
This basic rule is entrenched in the UK, US and IASC pronouncements on stock: SSAP 9, para. 26; ARB 43, Chapter 4, Statement 5; IAS 2, para. 6.
SSAP 9, para. 17. 10 Ibid.
Ibid., para. 18.
Ibid., para. 19.
Ibid., para. 3.
IAS 2, para. 7.
Ibid., para 10.
ARB 43, Chapter 4, Statement 3.
SSAP 9, para. 4.
Accountants Digest No. 158, A Guide to Accounting Standards — Valuation of Stocks and Work in Progress, Summer 1984, p. 7.
SSAP 9, Appendix 1, para. 12.
CA 85, Sch. 4, para. 27(2)(b).
Ibid., Sch. 4, para. 27(3). This requirement does not apply if stocks are valued at actual cost.
SSAP 16, Current cost accounting. This statement was withdrawn in April 1988.
IAS 2, para. 21.
Ibid., para. 23.
CA 85, Sch. 4, para. 25.
SSAP 9, Appendix 1, para. 12.
CA 85, Sch. 4, para. 25(2).
SSAP 9 (Original), Stocks and work in progress, May 1975.
Ibid., para. 1.
Ibid., para. 3.
Ibid., Appendix 1, para. 10.
Ibid., para. 22.
Ibid., para. 27.
Ibid.
CA 85, Sch. 4, para. 15.
BG plc, Annual Report and Accounts 1996, p. 36.
SSAP 9, para. 26.
Ibid., para. 27.
Ibid., CA 85, Sch. 4, Balance Sheet Formats.
Ibid., para. 3(3).
ARB 43, Chapter 4, Inventory Pricing.
IAS 2, para. 6.
E32, Comparability of Financial Statements, IASC, January 1989, para. 29.
IASC, Insight, October 1991, p. 9.
E38,para. 19.
IASC, Update, June 1992.
IAS 2, paras. 21–24.
Ibid., para. 36.
Ibid., paras. 19 and 20.
CA 85, Sch. 4, para. 26; SSAP 9, paras. 17 to 19.
SSAP 9, paras. 1, 3 and 4.
Ibid., paras. 18 and 19(c).
Ibid., para. 17.
See CA 85, Sch. 4, para. 15. The company’s directors will have to explain in the financial statements that their policy represents a departure from the statutory valuation rules, but has been applied in order to comply with SSAP 9 and is necessary to give a true and fair view. The full particulars and effects of the departure will also have to be given.
SSAP 9, Appendix 1, para. 2.
IAS 2, para. 14.
Ibid., para. 14.
SSAP 9, Appendix 1, para. 5.
Ibid., para. 6.
Ibid., para. 7.
IAS 2, para. 13.
Ibid., para. 14(c).
SSAP 9, Appendix 1, para. 8.
Ibid.
Accountants Digest No. 158, p. 12.
IAS 2, para. 11.
SSAP 9, para. 21.
Ibid., Appendix 1, para. 20.
Ibid., para. 26.
ARB 43, Chapter 4, Statement 7.
Ibid., para. 11.
IAS 2, para. 18.
SSAP 9, Appendix 1, para. 14.
SSAP 9 (Original), para. 22.
SSAP 9, para. 22.
Ibid., para. 28.
Ibid..
Ibid., para. 29.
Ibid., para. 23.
Ibid., para. 32.
Ibid., para. 30.
Ibid., Appendix 3, para. 5.
Accounting Research Bulletin No. 45, Long-Term Construction-Type Contracts, AICPA, October 1955, para. 15.
LAS 11, Construction Contracts, IASC, Revised 1993, para. 22.
Ibid., para. 30.
Ibid., para. 31.
Ibid., para. 23.
Ibid., para. 24.
Ibid., para. 32.
Ibid., para. 36.
Ibid., para. 37.
Ibid., para. 39.
Ibid., para. 40.
Ibid., paras. 42–44.
SSAP 9, para. 9.
Ibid., Appendix 1, para. 23.
Ibid., para. 9.
Ibid., Appendix 1, para. 26.
Ibid., Appendix 1, para. 27.
Ibid., para. 22.
CA 85, Sch. 4, para. 26(3)(b).
SSAP 9, Appendix 1, para. 21.
IAS 11, para. 18.
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© 1997 Ernst & Young
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Davies, M., Paterson, R., Wilson, A. (1997). Stocks and long-term contracts. In: UK GAAP. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-13819-7_14
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