Consumption sequence procedure
The consumption sequence method refers to a method
- for the simple determination of acquisition and production costs of similar items of current assets ,
- how goods are stored in a warehouse (see also warehousing ) .
Consumption sequence procedure in accounting
Accounting is based on a fictitious assumption of the order in which the objects are consumed or sold (also called consumption- sequence fiction). This assumption can be time-dependent, price-dependent or otherwise relevant. For the simplified valuation of stocks, in addition to the consumption sequence method, the use of fixed or average values can also be considered. The choice of valuation method is part of a company's accounting policy . As a rule, however, the procedure chosen must be retained, since arbitrary changes would contradict the principle of continuity .
According to § 256 HGB only LiFo and FiFo procedures are allowed. Before the amendments to the BilMoG , any sequence of consumption procedures was permissible if it did not obviously contradict the actual sequence of consumption. According to general opinion, however, the admissibility of the LoFo procedure was regularly denied, since the valuation of stocks at maximum prices contradicted the lowest value principle . The Income Tax Act allows gem. Section 6 (1) No. 2a EStG only allows LiFo to be used as a follow-up method in the tax balance sheet .
Consumption sequence in trade and warehouse management
Commercially and in warehouse management, the process is applied to a specific order to the goods waste stream realize . It is part of a company's product range policy . What is first on the shelves should be the first to be taken off the shelves. This procedure is particularly clear with regard to perishable goods (e.g. food).
Consumption Sequence Methods
LIFO: Last In - First Out
The time-dependent LIFO procedure assumes that the goods manufactured or purchased last are consumed or sold first. Likewise, the LIFO procedure can be used with rising prices of e.g. B. gasoline, wood or coal can be used. The LIFO method is used to keep the company value as low as possible. The assessment according to the Lifo method can be carried out both by permanent LiFo and by period LiFo (see also R 6.9, Paragraph 4 EStR ) .
Permanent LIFO procedure
With this procedure, the inflows and outflows are continuously (permanently) recorded in terms of quantity and value, so that the stocks are constantly updated.
Period LIFO procedure
The period LIFO procedure is a simplification, since changes in inventory only have to be determined within certain time periods (e.g. the fiscal year). If there are no changes in stocks at the end of the period, the values of the opening stocks are to be used. If the inventory has increased, the excess inventory is to be set at the acquisition or manufacturing costs of the first inventory additions in the financial year or the average acquisition or manufacturing costs of all additions in the financial year. This creates a new layer to be assessed separately in the amount of these costs. If the stock has become smaller, the shortfall is to be deducted from the last layer (or layers) formed in relation to their evaluation (s) of the initial stock.
FIFO: First In - First Out
FIFO means the booking of goods receipts at historical costs and the evaluation of the stock value not according to average costs ((average costs × old inventory + actual costs × additional inventory) / total inventory), but according to the actual costs of the oldest unused goods receipt. This time-dependent method assumes that the goods manufactured or purchased first are also consumed or sold first. This method is prevalent as it prevents goods from obsolescence and spoilage.
In the area of merchandise management , FIFO is the usual procedure, since - from the point of view of the end of the period - the oldest (first stored) stocks should be used first, if possible. When storing bulk goods , the FIFO principle is only approximately fulfilled by a silo . Goods with a best- before date or expiry date are usually removed from storage using the FEFO procedure. For non-perishable bulk goods, on the other hand, the more cost-effective storage in heaps is used, which can only be removed from above, i.e. considered according to the LIFO method. The difference between the two methods is particularly relevant for inventory valuation . Under commercial law, both the FIFO and the LIFO method are permitted for accounting ( Section 256 Sentence 1 HGB ). However, since only LIFO may be applied under tax law ( Section 6 (1) No. 2a EStG ), this procedure is more widespread in practice.
FEFO: First Expired - First Out
The time-dependent FEFO method assumes that stored elements which expire first are removed first. This method is based on the best before date and represents a more stringent form of the FIFO principle. The FEFO principle is used when there are more extensive requirements, for example due to customer requirements or standards . This is primarily the case in the food industry and in the pharmaceutical industry .
HIFO: Highest In - First Out
The price-dependent HIFO procedure assumes that the most expensive manufactured or purchased goods are consumed or sold first. When evaluating the inventory, you have to start from the strict lowest value principle . This method is used, for example, to show a high turnover in the bookkeeping .
LOFO: Lowest In - First Out
The price-dependent LOFO method is based on the assumption that the goods manufactured or purchased at the lowest cost are consumed or sold first. This method leads to a high mathematical valuation of the stocks. It is not permitted in the accounting because it violates the GoB's principle of prudence .
KIFO: Group in - first out
As part of the inventory valuation in the consolidated financial statements, the factual KIFO method assumes that the items purchased from group companies are first used or sold. The lower the proportion of group deliveries in inventory, the easier it is to offset intra-group profits or losses. The KIFO method is a purely quantitative allocation. The inventory must then be assessed using one of the methods mentioned above.
KILO: Group in - last out
In contrast to the KIFO method, the KILO method assumes that the external deliveries are implemented first. The share of internal deliveries in stocks is therefore set as high as possible. If the inventory is made up exclusively of group deliveries, this procedure also serves to simplify the assessment, as there is no longer a need to differentiate between internal and external deliveries.
See also
- FIFO: to link two processes in production engineering
- LOFO, LIFO, HIFO, FIFO: how data are stored in a data memory and how they are accessed - see stack or storage
literature
- Adolf G. Coenenberg , u. a .: Annual accounts and annual accounts analysis , 21st edition, Schäffer-Poeschel Verlag, Stuttgart 2009, ISBN 3791027700
- Harald Wedell, Achim A. Dilling: Fundamentals of accounting: bookkeeping and annual accounts. Cost and performance accounting , 13th edition, NWB-Verlag 2010, ISBN 978-3482547836
- Michael Griga, Raymund Krauleidis: Creating and reading balance sheets for dummies , 2nd edition, Wiley-VCH Verlag 2010, ISBN 978-3527705986
