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Can we revalue opening stock on annual basis for better comparability and proper reporting?


Due to regulatory requirements, my company has to prepare six months account last year for changing accounting year where closing stock was valued dividing six months expense by six months production of tea. this six months was plantation period where minimum production and maximum cost is made resulting high value of closing stock. this year thoseclosing stock becomes the opening stock and this year's closing stock is valued on annual basis. the problem is that COGS becomes abnormal because of high valued opening stock.

asked Oct 1 in General IFRS Discussion by anonymous
Question is not clear to me. What are the actual dates involved?

 "closing stock was valued dividing six months expense by six months production of tea." - I am not sure what this means?
My company is a tea manufacturing company. It is a public listed company. It prepared its financial statements based on calendar year (Jan-Dec). But the finance act of the country required that the company has to change its accounting year from calendar year to fiscal year (July-June). For this, the company had to prepare eighteen months account (Jan-Dec, 15 and Jan-June 16) last year when these two accounts were audited separately. usually closing stock is valued at lower of cost and NRV and the cost is ascertained through dividing the total production cost of the year by the total units (Kg of made tea) produced. when the six months accounts (Jan-June,16) was prepared, the value of closing stock became high as this period (Jan-June) is the cultivation period for the tea sector with minimum production and high cost. During this year we are going to prepare financial statements for 12 months (July'16-June'17) and when we prepare cost of goods sold statement it appears that COGS is abnormal this year because of high valued opening stock. this year per kg value of closing stock is around Tk.150 whcih was Tk.200 during last six month audited account and if we make valuation of closing stock for same period last year (Jul'15 to June'16), value will be around Tk.150 per kg in place of Tk.200 per kg. Now, my question is, can we revalue the opening stock with retrospective restatement of retained earnings and inventory to ensure comparability and faithful representation. one thing is that, my company is going to incur operating loss just because of this high value opening stock which increases the COGS.
Thank you.

1 Answer

0 votes
If you consider it to be an error, you can correct it by treating it as a change in an accounting estimate -- an adjustment of the carrying amount of an asset or liability, or related expense, resulting from reassessing the expected future benefits and obligations associated with the asset or liability. (as per IAS 8).

Recognise the change prospectively in profit or loss in:
- Period of change, if it only affects that period; or
- Period of change and future periods (if applicable).

Disclosure
- Nature and amount of change that has an effect in the current period (or expected to have in future)
- Fact that the effect of future periods is not disclosed because of impracticality
answered Oct 2 by Mysio Level 5 Member (22,620 points)


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