According to the FAS 5/2019 the actual cost includes expenses for the creation and (or) acquisition of inventories. Besides that, it includes expenses for bringing inventories to the condition and location, necessary to their consumption, sale or use, which were previously included into the cost of acquiring stocks in kind of transportation and procurement costs, in particular:
- Costs for processing, sorting, packing, improving the technical characteristics of inventories;
- Delivery to the place of sale, consumption and use of inventories; as well as new items:
- Estimated liabilities for dismantling, disposal, environmental restoration;
- Interest expenses for deferred payment (if the payment is deferred for more than 12 months). The amount of interests is determined either by agreement or by settlement.
If an organisation applies a simplified method of inventories accounting, then, according to p.7 FAS 5/2019 the actual prime cost of inventories includes only the amounts, payable to the seller (excluding VAT, as of the date of recognition), whereas the other costs, connected with acquisition and delivery of stocks, may be written off to the expenses of the period. Please note that the procedure for applying simplified methods of accounting shall be specified in the accounting policy of the organisation.
The FAS 5/2019 introduced special rules for recognizing inventories - tangible assets that remain at the full or partial disposal of the organisation after withdrawal of non-current assets, as well as inventories, generated in the process of maintaining and repairing non-current assets.
In such cases, the smallest of the values is taken as the actual prime cost:
- the cost of accounting for similar inventories, created or acquired in the normal operating cycle;
- the balance sheet value of the assets being written off and the costs of dismantling and disassembling fixed assets, bringing them to the condition necessary for sale, consumption, use.
The prime cost of inventories does not include expenses, connected with emergency situations, accidents, natural disasters, as well as expenses for storage. The exception is storage, which is a part of preparation for use or it is caused due to the peculiarities of creation (acquisition).