Year-End Inventory Procedures
Any departments maintaining inventories for supply and resale must maintain an annual year-end inventory plan which outlines procedures for physical inventory count.
Reason for Directive
“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.” –American Institute of Certified Public Accountants, Bulletin 43, Chapter 4.
Who must comply?
All UF Departments.
Year-End Inventory Plan
The department must prepare and update an annual year-end inventory plan. The plan must contain the following information:
- Dates and times inventory will be performed
- Location(s) of inventory
- General Description of the inventory
- Whether inventory is resale or supply
- Estimated value
- The department must follow generally accepted accounting principles to value the inventory
- The unit may not change inventory valuation procedures from one year to the next without approval from Auxiliary Accounting.
- Method used to value the inventory (Last In, First Out, First In, First Out, Weighted Average Cost, etc.)
- Names and positions of the staff performing the inventory counts.
- Names and positions of the staff reviewing and verifying the test counts.
Physical Inventory Count
Every year on June 30th or July 1st, the department must perform a physical inventory count and valuation. By the second Friday in July, the results of the inventory count and valuation must be reported to Auxiliary Accounting electronically (firstname.lastname@example.org) if the value of inventory exceeds $25,000 as of June 30th each year.
If the inventory count is performed on any day other than June 30th or July 1st, the department must provide a reconciliation between the total cost of the inventory counted and the total inventory reported at year-end on the financial statements submitted to Educational Business Activity/Auxiliary Accounting.
When performing the physical inventory count:
- The inventory should be reviewed and verified by a person other than the person who performed the count
- The inventory report should be in spreadsheet form and include the following:
- Quantities and costs for each item, extended to the right, and totaled
- Names and positions of staff involved in the count, testing, pricing and extending the value of the inventory by item
- Any differences discovered between inventory counts and perpetual or periodic inventory records must be investigated by supervisory personnel and any unresolved differences must be reported to the department’s accountable officer
First In, First Out (FIFO)
An accounting method for inventory in which the first items purchased are assumed to be sold first.
Last In, First Out (LIFO)
An accounting method for inventory and cost of sales in which the last items purchased are assumed to be sold first.
Weighted Average Cost
An accounting method for inventory that takes cost of goods available for sale and divides it by the number of units available for sale to give a weighted-average cost per unit.
05/01/2020: reviewed content
PRO303: Internal Controls at UF
Educational Business Activity/Auxiliary Accounting: (352) 294-7236