inventory valuation


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Inventory Valuation

In accounting, any way to estimate and report how much a company's inventory is worth. There are two primary ways to calculate inventory valuation. The first in, first out technique treats inventory acquired first as if it were sold first. That is, the sale of inventory is recorded against the purchase price of the oldest inventory, even if the physical goods are not the same. The last in, first out technique does the opposite: it records sales against the purchase price of the most recently acquired inventory. Both of these techniques are designed to estimate the value of inventory in a way that will decrease the company's tax liability while not reducing the book value of its assets.

inventory valuation

The cost assigned to inventory for the purpose of establishing its current value. Inventory valuation is determined according to the basis by which a firm assumes inventory units are sold. If the first units acquired are assumed to be the first units sold (first-in, first-out), costs of the last units purchased are used for valuing inventory remaining in stock. Conversely, if the last units acquired are assumed to be the first units sold (last-in, first-out), the costs of the first units purchased are used for valuing the inventory remaining in stock.
References in periodicals archive ?
Traditional accounting and financial control systems (including budgeting, inventory valuation, overhead allocations, cost accounting, and financial reporting) have emerged as significant barriers to deep implementation of lean practices.
Lines 18, Part III and 34, Part IV, are both described as inventory valuation adjustments.
An automobile dealer that uses the safe-harbor method must maintain records supporting all aspects of its inventory valuation, including a price list.
The risk manager also overlooked the effect inventory valuation conventions have on the choice of a retention, especially if the company has set its retention as a multiple of daily earnings.
He concluded that since the venture was a business, and the land was inventory, then the lower of cost and market method of inventory valuation could be applied.
Pretax charges for inventory valuation adjustments and write-offs of $128.
7 with inventory valuation and capital consumption adjustments 17 Rental income of persons 333.
The Tax Court was faced with two questions: (1) does the use of a replacement cost valuation method by a LIFO taxpayer clearly reflect income and (2) if it does, could Mountain State use such method when it filed Form 970, adopting the most recent purchases inventory valuation method?
The court accepted the taxpayer's inventory valuation based on catalogue list prices, less dealer discounts and selling expenses.
All three of the inventory valuation methods presented in Rev.
An inventory valuation potentially can increase the amount of purchase price allocated to acquired inventory, which is a short-lived asset (generally, less than one year), and accelerate the write-off of the purchase price.