Policy Area: Accounting and Financial Reporting
Policy Sub Area: Account Classification
Authority: GASB Codification, Section 1600, 140; AICPA Audit and Accounting Guide: State and Local Governments, Chapter 8, 8.81
Effective Date: 7/1/1995
Last Revision Date: 6/30/2017
Policy Owner/Division: Statewide Accounting
These inventories consist of general supplies and materials.
Where inventories are distributed among several locations, the cumulative total value should be considered in determining materiality. The exception to the foregoing is postage. Because of its liquidity, postage must be recorded when it exceeds $100.00 in value. At year-end, inventories for governmental funds should be reported in the balance sheet as an asset.
The inventories of the State and component units consisting of expendable supplies are valued at cost using either the first-in, first-out, last invoice cost, or average cost method. Merchandise for resale (bookstores and other retail operations) is valued at the lower of cost or market using the retail inventory method. Obsolete or damaged inventories should be written down to their lower of cost or market in the period the loss is incurred.
Inventories for governmental, proprietary and component units are recorded using the consumption method. This method records the inventory as expenses or expenditures when consumed.
At year end, all inventories that exceed $1,000.00 in value must be recorded or adjusted as of 6/30/XX.
Related Documents (Memos/Forms)
Please refer to the Chart of Accounts: Inventories 116AAA
MEMORANDUM NO. SAD 09-06: Revised Inventory Policy
1/16/2009 - Revised to establish a statewide uniform method for recording inventories in the Comprehensive Annual Financial Report (Annual Report). The revised policy requires the consumption method for recording inventory in governmental, proprietary funds and component units. This method records the inventory as expenditures or expenses when consumed.
1/30/2017 - Updated links
6/30/2017 - Revised paragraph 2 to better clarify treatment of inventory for state and component units as well as merchandise held for resale.