The impact of the assessment methods of the stock exits on an entity's performance

• Author: Trifan A.
• Pages: 121-130

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 10 (59) No. 1 - 2017

The impact of the assessment methods of the stock

exits on an entity’s performance

Adrian TRIFAN 1

Abstract: The choice of the assessment method of the stock exits affects both the value of the

final stock and the trading margins. An unjustified choice results in manipulating the

information about the stock value in the balance sheet as well as the one about the effect on

the performance (the overvaluation or undervaluation of the result). The Romanian

accounting referential clearly establishes the agreed methods. The use of one or the other is

left to the management and it is influenced by the specific activity. In addition, the chosen

method should be applied consistently for similar elements such as fungible assets and stocks

from one year to another. Changing the method is permitted only if it is justified.

Key-words: stocks, weighted average cost, first in – first out, last in – first out.

1. Overview

Stocks are current assets held for sale in the ordinary course of business, under

production or held as raw materials and other supplies to be used during the

production process or the provision of services.

As a rule, the entries of goods (stocks) are unproblematic in terms of

evaluation, as all the information on quantities and their prices are taken from the

source documents. Thus, at the entrance in the entity, the stocks and production in

progress are measured and recorded in the accounts as follows:

- raw materials, consumables, materials as inventory objects, merchandise

and other goods purchased against payment at cost;

- production in progress, semi-finished products, finished products and other

goods produced by the entity, at the cost of production;

- goods obtained free of charge at fair value;

- goods representing the company’s capital, at the input value.

In practical terms, the assessment of the stock exits causes difficulties. The

assessment of the stock exists (through use or sale) is performed according to the

nature of the considered element (identifiable stocks and fungible stocks).

1 Transilvania University of Braşov, Faculty of Economic Sciences and Business Administration,

adrian.trifan@unitbv.ro