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Stocks and long-term contracts

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UK Gaap

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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 as stock to be matched against future revenues. Some of the thorniest conceptual and practical problems arise as a result of these measurement issues, many of which have yet to be settled. For example, there is the question of which cost flow assumption should be used in the determination of cost of sales and, secondly, there is the ‘direct costing’ vs. ‘full absorption costing’ debate surrounding the costing of the stock asset.

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References

  1. SSAP 9, Stocks and long-term contracts, Revised September 1988, paras. 16–25.

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  2. E38, Inventories, IASC, August 1991, para. 3.

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  3. See, for example, SSAP 9, para. 1; Accounting Research Bulletin No. 43, AICPA, June 1953, Chapter 4, Inventory Pricing, Statement 2; and Eldon S. Hendriksen, Accounting Theory, p. 299.

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  4. SSAP 9, para. 3.

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  5. The term ‘stocks’ as used in this chapter, includes ‘manufacturing work-in-progress’.

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  6. This basic rule is entrenched in the UK, US and IASC pronouncements on stock: SSAP 9, para. 27; ARB 43, Chapter 4, Statement 5; IAS 2, Valuation and Presentation of Inventories in the Context of the Historical Cost System, IASC, October 1975, para. 20.

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  7. SSAP 9, para. 17.

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  8. Ibid.

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  9. Ibid., para. 18.

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  19. Ibid., This requirement does not apply if stocks are valued at actual cost.

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  25. Ibid., para 1.

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Author information

Authors and Affiliations

  1. Ernst & Young, USA

    Mike Davies, Ron Paterson & Allister Wilson

Authors
  1. Mike Davies
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  2. Ron Paterson
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  3. Allister Wilson
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© 1992 Ernst & Young

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Davies, M., Paterson, R., Wilson, A. (1992). Stocks and long-term contracts. In: UK Gaap. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12998-0_11

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