Now, your company may or may not have inventory, but if it does, it’s not just showing the balances broken into groups that’s expected from this note. Well, it’s that too obviously, but there’s a bit more to it. 

Yes, you show your “raw materials” and “goods held for sale”, but what you also should disclose, if applicable, is any goods in transit. It’s the goods you don’t have in your possession at the balance sheet date, but which belong to you by title only (risks relating to the preservation and safety of the goods have gone over from the supplier to you). In case the balance is insignificant it doesn’t need any special mentioning however should it be the other way around it’s worth mentioning what and from where exactly is “in transit”.

“Significant” is subject to management’s assessment what’s important for the users of the report. Significance is something the management decides is the level of when figures are to be explained in more detail – either more text to disclose further information or show a separate note to split certain line (i.e. raw materials) into various subgroups.

Technically when it comes to physical inventory there can be two different storing opportunities – at your own premises and at someone else’s premises. There’s also a third option which is someone else’s goods at your premises, but that’s similar to the last one. You don’t own the goods and someone else is just buying warehousing service more or less from you. Anyhow, in a case where you store your goods somewhere else or someone is outsourcing warehousing from you, this needs to be separately disclosed in the report. If both are the case they are to be disclosed separately as a part of this note.

If you want to learn more about Annual Report, please check out our Office ToDo UNI.