Hi John

thought I would start this on another thread. 

Re your other post

''Hi Guys

Please can I open this up more as my knowledge may be lacking here.

Is retail stock always valued at cost?  I always thought it was.  If it isn't I would be grateful for being pointed in the right direction as to when it isn't''

Stock is valued at the lower of:- cost and net realisable value (NRV)

The are a couple of valuation methods to get to the cost base, FIFO and AVCO.  you may have heard of LIFO too but this method is now prohibited under IAS2.

FIFO = First in, first out. 

AVCO = average cost.

Which one is relevant is to a business depends on the type of product being sold.  One may be better in times of rising prices (FIFO).   A few different aspects to take into consideration.

NRV requires some adjustments to be made,  where it is considered adaptations are required for a stock item to sell. Doesn't need to be an expensive item that needs adjusting, eg a car, might be something of much smaller value. 

To calculate NRV broadly, calculate the costs (*) to prepare the item for sale and deduct this total from the expected selling price of the item.  

(*) can include cost of pro until, advertising, transport costs etc. 

More of an issue in manufacturing, but it does definitely apply in retail.  Just trying to think of another workable eg, other than vehicles.

Jewellery....stone missing from a ring? Needs a replacement stone. Selling price - cost of stone =NRV.  Versus cost. Take lower.

Think of a product In your clients retail store and see what you can come up with?

HTH and that I'm making sense.