Intra-company unrealised profit/loss

Companies usually have a requirement to provide for non-saleable stock by way of stock obsolescence provisioning, on a straight-line basis over a prescribed period, which is defined by the user.

Some companies prefer to adjust the actual carrying value of stock to achieve the same result but this process in prohibited by tax legislation in certain countries.

This Unrealised Profit and Loss process provides by way of provision the depreciation of stock on a straight-line basis over a prescribed period, as defined by the user, without actually adjusting or writing down the carrying value of stock.

Inventory carried in multiple counties and multiple base currencies can be consolidated so that unrealised gains and losses arising from intra-company sales and monthly currency exchange rate fluctuations are taken care of in the combined reporting.

Unrealised gains and losses journals are automatically created and posted to the General Ledger system.

The calculation of unrealised gains and losses is substantiated by various reports.

This module utilises the Stock Obsolescence data files to determine the current written down value of all items in each country’s database.

The source country of release/publication for each item is identified in the Item Master file field ‘country of origin’.

A maintenance file contains the general ledger accounts for unrealised gains and losses and the corresponding balance sheet control account by inventory grouping. This maintenance file can be inquired and reported on.

A file is generated each month and is used to determine the monthly gains and losses as the difference between current value and previous value.

Following are the calculations used:

Determine the currency required for the gain or loss journal.
For the foreign owned items covert the base currency inventory value (example Singapore or Malaysia) to the required journal currency according to the month end exchange rate.
Refer to the items originating database and convert that inventory cost to the journal currency according to the common rules for converting currency at the month end rate.
Calculate the imbedded gain or loss as the difference in unit cost value multiplied by the units on hand.
Post this month’s gain or loss to the monthly valuation table.

A report is then printed showing the gains and losses and basis of calculation for the month by inventory category. This can be printed in summary or detail.

The calculation of the gains or losses and the report may be run as many times as required until the report is correct. Exchange rates may be adjusted in the process to achieve this condition. Upon completion of this iterative process the final production of the journals may be performed. This program posts the differential between previous month unrealised gain or loss and current month values as general ledger journals. The journals are summarised by General Ledger account in order to simplify the general ledger.

The journals produced are processed through the General Ledger interface file. Using the standard audit trail produced in the general ledger end-of-day process.

Historical gains and losses records can be deleted after a user defined retention period has elapsed.