This policy outlines guidelines and accounting policies to ensure that inventory is properly controlled and costed and that losses or shortages are prevented. It applies to all inventory items, including raw materials/parts, work in progress, and finished goods and consigned inventory. The procedures focus on inventory valuation, slow moving and excess inventory/reserves, reconciliation of perpetual inventory, physical inventory, consigned inventory, scrap, intercompany transfers, and capitalized cost.
In this sample, inventories are stated at the lower of cost or market. The valuation method for each item of inventory shall remain consistent from one accounting period to the next accounting period.