We understand that the COVID-19 outbreak has had a major impact on our customer’s businesses. One impact is that trading stock valuations as at 31 March 2020 will have been interrupted.
Trading stock valuations as at 31 March 2020
The Commissioner will allow a late 2020 stocktake, provided it is carried out as soon as practicable and no later than 31 May 2020. The 2020 closing stock figure needs to be reconstructed by adjusting for post-balance date sales and purchases – those made between balance date and the late stocktake date.
Example: Wiremu's Home Appliances Ltd
Wiremu’s Home Appliances Ltd sells and repairs kitchen appliances. It has a standard balance date of 31 March. At the end of the 2020 income year, the company was required to value its trading stock. However, as a result of COVID-19, it had to shut down its business and was unable to undertake the stocktake on 31 March 2020.
On the 28th April, the company reopens its business and undertakes a late stocktake. It has kept a record of all amounts of post-balance date sales and purchases. Using the cost valuation method, it adjusts the late stocktake figure (to reconstruct what would have been the amount of closing stock at the end of 2020), by adding back the cost of post-balance date sales and deducting the cost of post-balance date purchases.