Inventories – Fair Value in the Form of Materials, Goods and Finished Products

Kalina Kavaldzhieva
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Kalina Kavaldzhieva: University of National and World Economy, Sofia, Bulgaria

Ikonomiceski i Sotsialni Alternativi, 2022, issue 4, 70-88

Abstract: An important issue when making a management decision is how to get a real idea of the value of the company’s stock. The importance of the problem is dictated by several facts: 1. In this way, it should be assessed what money is blocked in material stocks; 2. How these assets affect the state’s trade turnover and from there the state’s economy as a whole. The influence that these assets indicate on the value of the enterprise’s capital is also significant on the credit adequacy, as well as on the cost price of the enterprise’s final products. There are different types of values for different purposes – market value, fair value for accounting purposes, fair value for tax purposes, fair value for appraisal purposes. When compiling its financial statements, the enterprise complies with the principles of “materiality – the enterprise presents separately each significant group of articles of a similar nature. Aggregation of amounts for articles of a similar nature is allowed when the amounts are immaterial or the aggregation is done for the purpose of achieving greater clarity. The amount per item is material if the omissions and incorrect presentation of the position could influence the economic decisions of users made on the basis of the financial statements, or would lead to a violation of the requirement for a true and fair presentation of the property and financial situation, financial results from activity, changes in cash flows and in equity†. Another principle of accounting is “valuation of the items that are recognized in the financial statements is carried out at the cost of acquisition, which may be the purchase price or cost or by another method when this is required by the applicable accounting standards†. In order to comply with these principles, it is necessary to derive a fair value of inventories.

Keywords: fair value; market value; inventories; evaluation; depreciation; reassessment; book value (search for similar items in EconPapers)
JEL-codes: G32 M41 M42 (search for similar items in EconPapers)
Date: 2022
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