Time of recording and valuation of changes in inventories

3.120 The time of recording and valuation of changes in inventories should be consistent with that of other transactions in products. This applies in particular to intermediate consumption (e.g. for materials and supplies), output (e.g. work-in-progress and output from storage of agricultural products) and gross fixed capital formation (e.g. work-in-progress). Consistency is also required for processing-to-order flows. For example, if goods are processed abroad and it involves a substantial physical change in the goods, the goods are to be included in exports (and, later, in imports) (see paragraph 3.135.). This export is reflected by a concomitant reduction in the inventories and the related import is later also recorded as an increase in the inventories (when not immediately used or sold).

3.121 Changes in inventories should be valued at the time of entering the inventories (for goods entering) or at the time of withdrawal (for goods withdrawn).

3.122 The prices used should be consistent with those of other flows, implying more specifically that:

1. output of finished goods transferred into the producer's inventories are valued as if they were sold at that time, at current basic prices;
2. additions to work-in-progress is valued in proportion to the estimated current basic price of the finished product;
3. reductions in work-in-progress as withdrawn from inventories when production is finished are valued at current basic prices of the unfinished product;
4. goods transferred out of inventories for sale are valued at basic prices;
5. goods for resale entering the inventories of wholesalers and retailers, etc. are valued at their actual or estimated purchasers' prices of the trader;
6. goods for resale withdrawn from inventories are valued at the purchasers' prices at which they can be replaced at the time they are withdrawn (not when acquired).

1. for materials and supplies: as materials and supplies actually withdrawn to be used up in production (intermediate consumption);
2. for work-in-progress: as deduction from the additions accruing to production carried out in the same period;
3. for finished goods and goods for resale: treated as withdrawals at the current price of undeteriorated goods.

1. when changes in the volume of inventories are fairly regular, a practical method which comes close to the theoretical valuation principle is to multiply the volume change of the inventories by the average prices for the period (purchasers' prices for inventories held by users or by wholesalers or retailers, basic prices for inventories held by their producers);
2. in case the prices of the goods involved remain fairly constant, even large fluctuations in the volume of inventories may not invalidate a simple approximation, i.e. the multiplication of the volume change with the average price;
3. if both the volume and the prices of the inventories change substantially within the accounting period, more sophisticated approximation methods are required. For example, quarterly valuation of the changes in inventories or the use of a priori information about the distribution of the fluctuation within the accounting period (fluctuations may be largest at the end of the calendar year, during harvest time, etc.);
4. if only information about the values at the beginning and end of the period are available (e.g. in case of whole sale or retail trade in which inventories often exist of many different products), the changes in volume between the beginning and end of the period should also be estimated. This can be done by estimating (assuming) turn-over rates by type of product.