SUBSECTION 3.1.1.2
ACCOUNTING AND REPORTING REQUIREMENTS

3.1.1.2.1

Inventory Methods and Requirements

Effective Date:

July 1, 1998

3.1.1.2.1.a

Merchandise and consumable inventories are generally accounted for separately. Application of allowed alternative inventory valuation methods can vary among inventories. However, the method selected is to be applied consistently. Changes in inventory methods and the financial effects of those changes on an agency’s financial statements are to be included in fiscal year end financial disclosures reported to OFM.

3.1.1.2.1.b

All merchandise, food stamp, livestock, and donated inventories are to be physically counted, valued, and recorded in the general ledger.

3.1.1.2.1.c

Consumable inventories are to be physically counted, valued, and recorded in the general ledger when the balance on hand at an inventory control point is estimated to exceed $25,000 in value. In calculating balance on hand, agencies may exclude those items sometimes referred to as benchstock items (characterized by high turnover rate and extremely low unit cost) such as nuts, bolts, screws, washers, etc. as defined in writing by the agency inventory officer.

3.1.1.2.1.d

Inventories are to be maintained using either a perpetual or periodic inventory method as described in Subsection 3.1.2.2. Manual or automated inventory systems are acceptable.

• For inventories using a perpetual inventory system, agencies are to perform a physical inventory count at least biennially.

• For inventories valued using the periodic inventory method, agencies are to perform a physical inventory count at least annually at fiscal year end.

3.1.1.2.1.e

Refer to Subsection 2.2.4.4 for instructions on accounting for inventories by fund type.

3.1.1.2.2

Inventory Valuation

Effective Date:

July 1, 1998

The agency inventory officer is to document in writing the method(s) used to value the agency’s inventories as follows:

3.1.1.2.2.a

First-in, First-out (FIFO) - This method allocates costs on the assumption that goods are used/sold in the order in which they are purchased. In other words, the first goods purchased are assumed to be the first used or sold. Thus, inventory on hand is assumed to represent the most recent purchases.

3.1.1.2.2.b

Last-in, First-out (LIFO) - This method allocates costs on the assumption that the last units acquired are the first units consumed/sold. Thus, the units in the ending inventory are assumed to come from earlier acquisitions.

3.1.1.2.2.c

Weighted Average (W.A.) - In general, this method values ending inventory based on the average cost per unit for the period.

3.1.1.2.2.d

Other - An agency may use an inventory valuation method other than those described above as defined in writing by the inventory officer.

3.1.1.2.3

Inventory Documentation

Effective Date:

July 1, 1998

3.1.1.2.3.a

A physical count of inventories, where appropriate, is to be taken pursuant to Subsection 3.1.2.3. Physical inventory procedures and instructions are to be documented in writing.

3.1.1.2.3.b

Perpetual inventory records are to be reconciled with the physical count. When a perpetual inventory record is not maintained, the physical inventory listing, resulting from the physical count required by Subsection 3.1.2.3, constitutes adequate documentation of the inventory.

3.1.1.2.3.c

When the reconciliation is complete, the inventory officer is to certify in writing that the inventory was substantiated by counting and reconciliation.

3.1.1.2.3.d

When the reconciliation is not necessary, the inventory officer is to certify in writing that the inventory was substantiated by an actual count and fair price to determine total cost.