Case: A stock valued at the Unit Average Price.
We understand that for any shortages found during a stocktake, the value of stock is written-off at the Unit Average price for quantities found short.
However, my query is about cases when Surpluses are found, and cannot figure out which of the following would be appropriate:
(a) Do we include the surpluses for existing items at the current unit average price
or
(b) Do we include the surpluses at while we dilute the unit average price to reflect the original value.
An illustrative example would be as follows:
Before adjustment:
Qty in Stock: 10 Average Unit Price $10, hence total Stock Value: $100
A stocktake is done and an additional 10 unit is found (probably due to an old transaction not processed properly, or whatever)
With solution (a) above, the new quantity would become 20 with same unit price would produce Value $200.
With solution (b) above, the new quantity would become 20 with a diluted unit price and would produce same value of $100.
I have tried to see what IAS2 mentions, but there seems to be no clue on how to proceed.
Grateful to assist.
Krishna
We understand that for any shortages found during a stocktake, the value of stock is written-off at the Unit Average price for quantities found short.
However, my query is about cases when Surpluses are found, and cannot figure out which of the following would be appropriate:
(a) Do we include the surpluses for existing items at the current unit average price
or
(b) Do we include the surpluses at while we dilute the unit average price to reflect the original value.
An illustrative example would be as follows:
Before adjustment:
Qty in Stock: 10 Average Unit Price $10, hence total Stock Value: $100
A stocktake is done and an additional 10 unit is found (probably due to an old transaction not processed properly, or whatever)
With solution (a) above, the new quantity would become 20 with same unit price would produce Value $200.
With solution (b) above, the new quantity would become 20 with a diluted unit price and would produce same value of $100.
I have tried to see what IAS2 mentions, but there seems to be no clue on how to proceed.
Grateful to assist.
Krishna