mefielding training videos on the practical aspects IPSAS IFRS implementation as it relates to inventory as given by our experienced staff. Part 2

1. Inventory Part 2 IPSAS
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Understand the major changes, challenges and benefits related to IPSAS
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2. Recognition & Measurement of Inventories
 Do we have control?
 In the case of purchased Inventories, control passes when legal title is
obtained. This can happen before physical receipt of goods - in that case
goods in transit must be included as inventory of the Organization that is
purchasing them (hence the importance of reviewing contractual agreements
with vendors);
 If an entity has physical custody of goods on behalf of another party, but can
not use the goods for its own benefit, then the entity can not show these
items in its financial statements as assets.
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3. Consignment Stock
 The case of consigned goods shows a situation where control is not obvious.
Consigned goods:
 Are in the custody of one party (the consignee)… but…
 Belong to another party (the consignor)
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4. Inventory
 Exclude
 Storage costs
 Indirect overheads
 Selling costs
These are period expenses
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 Include
 Acquisition price
 Non refundable taxes
 Any other costs necessary to bring
inventory to the point where it can
be used
 Freight costs of bringing inventory
to warehouse or place of storage
All these costs are amalgamated and
give the value of the inventory

5. Donated Inventory
 Valued at fair value at date of donation
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6. Manufactured Inventory
 Include, direct
 Materials
 Labour
 Overhead
 Exclude
 Selling costs
 Non direct overhead
 Selling overhead
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7. IPSAS 12 Requirements
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 IPSAS requires inventories to be capitalized when acquired and expensed
when they are:
 Consumed
 Exchanged
 Distributed
 Sold
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8. Inventory Double Entry Book Keeping
 Assuming Ministry adopts IPSAS at 1 January 2014. At that date the inventory
will be valued.
 Dr Inventory in Statement of comprehensive income (PL)
 Cr IPSAS adjustment
 Following 12 months, as inventory is acquired
 Dr Purchases CR Cash/Payables
 31 December Inventory is again valued
 That value is entered in the books and records
 Dr Inventory (SFP) Cr Inventory Statement of comprehensive income (PL)
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9. Inventory Double Entry Book Keeping
 In PL therefore the cost of sales will be
 Inventory 1/1/14,
 Purchases 1/1/14- 31/12/14
 (Inventory 31/12/14)
 Or in words, what we sold/used is what we had at the start of the period plus
what we bought minus what is left at he end
 Detailed inventory records are kept separate from IPSAS information in the
Oracle, SAP, Sage modules
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