Contributors

This trouble looks like delivery cost of Intrastat.
On intrastat statement, all delivery costs (required) and packaging costs (optional) have to be shared in COGS.

Example:

Sale Order
Product	Qty	Unit Price	Subtotal	Delivery cost	Intrastat value	Pack.Cost
Prod.A	10,0	€ 10,50	€ 105,00	€ 6,56	€ 111,56	€ 3,28
Prod.B	10,0	€ 5,50	€ 55,00	€ 3,44	€ 58,44	€ 1,72
Packaging	1,0	€ 5,00	€ 5,00
Delivery	1,0	€ 10,00	€ 10,00
TOTAL			€ 175,00
Tot.Goods & Service	20		€ 160,00	€ 10,00	€ 170,00	€ 5,00

Antonio M. Vigliotti

Mobile (+39) 342.8740910

Il 15/03/21 01:56, Marco Marchiori ha scritto:

Graeme

as you said I was not so accurate to include the IAS compliance in the discussion.
In any case we defined the nature of such costs: they are variable costs, they should be included in cogs but they could be allocated, with a sort of ABC, "depending on the sales order composition".
If they are "extra-amounts" (as Daniel said) they should be allocated in addition to the cost (apparently) already included in the product, but of course I would not discuss IAS compliance here!
So I suggested to track them separately (we agree on that).
Then the entry I advised to make was an absorption one, that would work both in continental and anglo-saxon accounting.
If I worked for a business like that (independently from IAS) I would ask myself if it's more important the cost of the product or the cost of the order...

Ciao

Marco

Il giorno dom 14 mar 2021 alle ore 21:57 Graeme Gellatly <gdgellatly@gmail.com> ha scritto:

Hi,

Under IAS2 this advice is not correct. It is very clear that product costs relate to bringing the product to its present location and condition. It cannot include non incurred costs, or costs that form part of the sales process. Now if it forms part of a manufacturing process, then they can be included under costs of conversion, but only if they are part of that conversion. If there is no production process then no costs. If there is then actually the manufacturing process handles it all already because it occurs prior to the sales transaction.

Here is the exact clause.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

So in this case where the packaging costs are part of the sales process they do not form cost of inventories. Indeed any costs incurred in the selling process are explicitly excluded.

However it should of course be included in Cost of Goods sold, but it is no different to any other cost / revenue required at time of sale (or purchase for that matter), such as rebates, discounts on either the vendor/customer side related to a particular customer. It is a very common use case, and its the same reason you need to accrue warranty liability accrual at time of sale rather than in inventories (or time of claim for that matter). The only tricky part being the management of the sales transaction because you need some way to record that (y), which is variable in this case, but effectively you end up with.

CR Inventory - Product A x
CR Packaging y

DR COGS - Product A (x+y).

Is how I'd do it, probably just adding the packaging to the picking (not the sale) and then overriding the anglosaxon entries to allocate costs.

That is the simple case, Obviously there is a mix of products involved, all utilising the packaging, so a reasonable allocation decision needs to be made, probably a dollar weighted basis, but possibly volume. Under anglo saxon the way Odoo operates it will be a significant amount of work, as you then need to reconcile both sides of the accrual accounts, but really it is no different to the same issue you have with A/P accrual accounts and having to allow for expected rebates.

On Mon, Mar 15, 2021 at 8:32 AM Marco Marchiori <info@marcomarchiori.com> wrote:

In general (accountant's view)
1- A standard, or minimum or what-you-want package cost should be included in product cost, and "absorbed" when you FG is produced
2- The actual cost should be recorded when incurred (order > invoice)
3- The extra-package cost would be the "algebraic sum" of cost incurred and absorbed
4- The total package cost would be the sum of extra and COGS-included package cost or (sould be the same) the total cost incurred referred to the product sold

Ciao

Marco 

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Antonio M. Vigliotti

Mobile (+39) 342.8740910

Graeme

as you said I was not so accurate to include the IAS compliance in the discussion.
In any case we defined the nature of such costs: they are variable costs, they should be included in cogs but they could be allocated, with a sort of ABC, "depending on the sales order composition".
If they are "extra-amounts" (as Daniel said) they should be allocated in addition to the cost (apparently) already included in the product, but of course I would not discuss IAS compliance here!
So I suggested to track them separately (we agree on that).
Then the entry I advised to make was an absorption one, that would work both in continental and anglo-saxon accounting.
If I worked for a business like that (independently from IAS) I would ask myself if it's more important the cost of the product or the cost of the order...

Ciao

Marco

Il giorno dom 14 mar 2021 alle ore 21:57 Graeme Gellatly <gdgellatly@gmail.com> ha scritto:

Hi,

Under IAS2 this advice is not correct. It is very clear that product costs relate to bringing the product to its present location and condition. It cannot include non incurred costs, or costs that form part of the sales process. Now if it forms part of a manufacturing process, then they can be included under costs of conversion, but only if they are part of that conversion. If there is no production process then no costs. If there is then actually the manufacturing process handles it all already because it occurs prior to the sales transaction.

Here is the exact clause.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

So in this case where the packaging costs are part of the sales process they do not form cost of inventories. Indeed any costs incurred in the selling process are explicitly excluded.

However it should of course be included in Cost of Goods sold, but it is no different to any other cost / revenue required at time of sale (or purchase for that matter), such as rebates, discounts on either the vendor/customer side related to a particular customer. It is a very common use case, and its the same reason you need to accrue warranty liability accrual at time of sale rather than in inventories (or time of claim for that matter). The only tricky part being the management of the sales transaction because you need some way to record that (y), which is variable in this case, but effectively you end up with.

CR Inventory - Product A x
CR Packaging y

DR COGS - Product A (x+y).

Is how I'd do it, probably just adding the packaging to the picking (not the sale) and then overriding the anglosaxon entries to allocate costs.

That is the simple case, Obviously there is a mix of products involved, all utilising the packaging, so a reasonable allocation decision needs to be made, probably a dollar weighted basis, but possibly volume. Under anglo saxon the way Odoo operates it will be a significant amount of work, as you then need to reconcile both sides of the accrual accounts, but really it is no different to the same issue you have with A/P accrual accounts and having to allow for expected rebates.

On Mon, Mar 15, 2021 at 8:32 AM Marco Marchiori <info@marcomarchiori.com> wrote:

In general (accountant's view)
1- A standard, or minimum or what-you-want package cost should be included in product cost, and "absorbed" when you FG is produced
2- The actual cost should be recorded when incurred (order > invoice)
3- The extra-package cost would be the "algebraic sum" of cost incurred and absorbed
4- The total package cost would be the sum of extra and COGS-included package cost or (sould be the same) the total cost incurred referred to the product sold

Ciao

Marco 

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--

M a r c o  M a r c h i o r i    

consulente funzionale

dottore commercialista, revisore  legale
Via Stazione 12, 30035 MIRANO (VE);    telefono  e  fax  041 488195
codice fiscale   MRCMRC67H11F241M;      partita IVA   03813290271

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This e-mail may contain information that is confidential, privileged or otherwise protected from disclosure. Use of such information is exclusively reserved for the recipient of this e-mail.
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Hi,

Under IAS2 this advice is not correct. It is very clear that product costs relate to bringing the product to its present location and condition. It cannot include non incurred costs, or costs that form part of the sales process. Now if it forms part of a manufacturing process, then they can be included under costs of conversion, but only if they are part of that conversion. If there is no production process then no costs. If there is then actually the manufacturing process handles it all already because it occurs prior to the sales transaction.

Here is the exact clause.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

So in this case where the packaging costs are part of the sales process they do not form cost of inventories. Indeed any costs incurred in the selling process are explicitly excluded.

However it should of course be included in Cost of Goods sold, but it is no different to any other cost / revenue required at time of sale (or purchase for that matter), such as rebates, discounts on either the vendor/customer side related to a particular customer. It is a very common use case, and its the same reason you need to accrue warranty liability accrual at time of sale rather than in inventories (or time of claim for that matter). The only tricky part being the management of the sales transaction because you need some way to record that (y), which is variable in this case, but effectively you end up with.

CR Inventory - Product A x
CR Packaging y

DR COGS - Product A (x+y).

Is how I'd do it, probably just adding the packaging to the picking (not the sale) and then overriding the anglosaxon entries to allocate costs.

That is the simple case, Obviously there is a mix of products involved, all utilising the packaging, so a reasonable allocation decision needs to be made, probably a dollar weighted basis, but possibly volume. Under anglo saxon the way Odoo operates it will be a significant amount of work, as you then need to reconcile both sides of the accrual accounts, but really it is no different to the same issue you have with A/P accrual accounts and having to allow for expected rebates.

On Mon, Mar 15, 2021 at 8:32 AM Marco Marchiori <info@marcomarchiori.com> wrote:

In general (accountant's view)
1- A standard, or minimum or what-you-want package cost should be included in product cost, and "absorbed" when you FG is produced
2- The actual cost should be recorded when incurred (order > invoice)
3- The extra-package cost would be the "algebraic sum" of cost incurred and absorbed
4- The total package cost would be the sum of extra and COGS-included package cost or (sould be the same) the total cost incurred referred to the product sold

Ciao

Marco 

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In general (accountant's view)
1- A standard, or minimum or what-you-want package cost should be included in product cost, and "absorbed" when you FG is produced
2- The actual cost should be recorded when incurred (order > invoice)
3- The extra-package cost would be the "algebraic sum" of cost incurred and absorbed
4- The total package cost would be the sum of extra and COGS-included package cost or (sould be the same) the total cost incurred referred to the product sold

Ciao

Marco 

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