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Thread: Pastel Evolution inventory costing methods

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    Question Pastel Evolution inventory costing methods

    I am a bit confused about Pastel Evolution's inventory costing methods.

    So according to Pastel Evolution you can select on of the following three default costing methods (copied from their documentation):
    Weighted Average This is the usual method. The system calculates the cost of each item as the average cost of all inward movements of this item. These are usually purchases.
    Latest Cost With this method, the cost of the last inward movement of the item becomes the cost of this item.
    Manual Cost This lets you specify a fixed cost for inventory items, which does not change as you purchase more inventory.

    Weighted Average cost is an accepted costing method according to IFRS and IFRS for SMEs.
    Manual cost sounds like it is intended to be used like a standard costing system, which is an accepted costing method according to IFRS and IFRS for SMEs, if it approximates actual cost.

    But Latest Cost doesn't seem to be consistent with IFRS or IFRS for SMEs.

    Am I misunderstanding how Latest Cost is implemented?
    Is it consistent with IFRS?

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    Mynhardt no it isn't.

    Both the other two would require considerable effort at the end of the reporting period to comply with any standard, and results in distorted interim reporting. I can't easily think of a reason why one would use them.

    If negligible inventory levels are held, I suppose it is not too much of an issue.

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    I find it quite shocking that Pastel Evolution would recommend non-IFRS compliant inventory costing systems without at least warning the user that it is not compliant.

    Do you perhaps know exactly what Pastel Evolution does under each of their costing methods. I am interested in how one would need to adjust the inventory and cost of sales to make such a set of Pastel Evolution books IFRS compliant.

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    If I recall correctly the differences were in the Purchase Variance account, that arise from each inventory receipt. You would have to examine the default Link Codes to be sure (in that instance the client's system was set Latest Cost). The particular client keeps significant stock holdings of raw materials and consumables so it had considerable impact.

    It is near impossible to predict what the outcome will be, but in inflationary times it is a reasonable bet that it will result in an overvaluation of inventory.

    When it was discovered, a consultant set it to average and as as far as I recall the system did a revaluation, but it was easily 4 years ago, so my memory is decidedly unreliable.

    There was a time when LIFO was compliant (now I am showing my age) so perhaps Pastel were covering their bets.

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