Stocking and Liquidating Inventories for Supply and Resale
Directive Statement
Inventories are to be maintained at levels which will provide a service level commensurate with legitimate user need and at the lowest ultimate cost to the University. Obsolete and inactive items should be liquidated promptly to minimize losses.
Reason for Directive
Per the American Institute of Certified Public Accountants, Bulletin 43, Chapter 4 “The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location.”
Who must comply?
All UF departments.
Procedures
Stocking
Stock adjustments are to have the signed approval of the accountable officer or designee who must not be the individual responsible for the inventory
- Large adjustments shall be supported by an explanation
- The accountable officer should delegate authority to the individual responsible for a supply inventory to place orders for stock or issue
An item should be placed in stock when the following requirements are met:
- usage is repetitive, and/or
- There is a net economic advantage to the University which more than offsets the cost of handling as a stores item, or
- When the requisitioner’s service requirement cannot be met by direct shipment from the supplier
Please encourage standardization on those items fulfilling a required function at the lowest cost by continuously analyzing the needs of the requisitioner.
The stock selection should be regularly reviewed to assure that the pattern of use qualifies the item for continued retention.
Liquidation
If review determines that retention is not necessary, or inventory becomes damaged:
- Someone at an upper level must review the status of the inventory
- This person must authorize in writing the disposition and write-off of the item(s)
Please note, when an item qualifies for stocking per the requirements above, but is only used by a single user, a commitment should be obtained from the user that if the material becomes obsolete or its use is discontinued, any liquidation costs for remaining stock will be to the user. Every effort must be made by the user and department to minimize such charges.
Last Reviewed
Last reviewed on 03/20/2024
Contacts
Auxiliary Accounting: (352) 294-7236