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Stock obsolescence

This general ledger function provides the facility to generate general ledger provision for stock obsolescence on the basis of the age of the stock. The process provides for the depreciation of non-saleable stock by way of stock obsolescence provisioning, on a straight line basis over a prescribed period. The carrying value of the stock is not actually adjusted or written down. The purpose therefore of this process is to provide by way of provision the depreciation of stock on a straight line basis over a prescribed period defined by the user.

Multiple stock obsolescence formulas, in matrix form, can be defined based on ‘item grouping’ levels. Multiple formula sets can be defined to be used for different purposes, for example management accounts or tax reporting.

The stock obsolescence matrix can be setup for each Item Level, over a selected period where the stock is to be amortized and the general ledger code to which this cost should be charged.

The calculation process involves determining the current written down value of inventory based on the age of the products and generating journals for the difference between that and the previously adjusted written down value. The actual inventory value is not affected and if the stock is subsequently sold, a reversal of the provision is produced by this process. The fact that the value of the stock has not been diminished means that when an obsolete product is sold, the margin is not exaggerated.

Also provided for are straight line write downs over the inventory values by publication (release) date or override date (for example for reprints where the publication date should not be altered).

Provision rates can vary with age of product. The system allows up to eight provision rates over the life of the inventory.

The calculation of the provision for obsolescence is defined independently of the definition for General Ledger accounts for the journals so ongoing maintenance is simplified.

Reporting at Item Level as substantiation for journals produced, is available via the Stock Obsolescence Report. The process produces general ledger journals by company that are interfaced to the General Ledger Module.

Process flow

 

 

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