Supply Management Operations - Comptroller

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DoD Financial <strong>Management</strong> Regulation Volume 11B, Chapter 55 December 1994 b. Inventory Held for Repair. Inventory held for repair shall be reported on DoD inventory reports and financial statements as described above. General ledger account 1529.3A, “Estimated Repair Costs,“ has been established to record, on an aggregate basis, the average cost to repair items that require repair. General ledger account 1529.3B, “Estimated Exchange Costs,“ has been established to record an 55-14
DoD Financial <strong>Management</strong> Regulation Volume 11B, Chapter 55 December 1994 estimate of operating costs to accept and process exchange items and includes carcass attrition (washouts) and transportation costs. When repairs are completed, the actual cost of repairs shall be charged to general ledger account 1529.1X, “Actual Repair Costs.“ Paragraph N.4. of this chapter illustrates this accounting process. c. Excess, Obsolete, and Beyond Repair Inventory. Excess, obsolete, and beyond repair inventory shall be valued at its expected net realizable value. “Net realizable value“ is the current salvage rate, expressed as a percentage of latest acquisition cost, as that rate is reported by the Defense Reutilization and Marketing Service (DRMS). The difference between the value of the inventory before identification as excess, obsolete, and beyond repair and its expected net realizable value after such identification shall be recognized as a loss (or gain) in current period operations. Any subsequent adjustments to its net realizable value shall be also recognized as a loss (or gain) in the period in which such adjustment occurs. [NOTE: Materiel transferred to the DRMS, whether from the supply system, other DBOF, or non-DBOF activities, non appropriated fund operations, or other agencies of the federal government, will be reported by the DRMS, not as inventory, but as other personal property (general ledger account 1765, “Property Awaiting Disposal“) and valued by the DRMS at the current salvage rate as specified in this paragraph.] d. Inventory in Transit. Inventory in transit from commercial vendors, general ledger account 1521.1, “Inventory in Transit from Procurement,“ shall be recorded at the value of material in transit based upon amounts paid or to be paid. Inventory in transit from another DoD stockage point, general ledger account 1521.2, “Inventory in Transit from DoD Entities,“ shall be recorded at latest acquisition cost (e.g., standard price). Depot level reparables (i.e., carcasses) provided in exchange for serviceable items shall be recorded in general ledger account 1523.1, “Exchange (DLR) Inventory in Transit,“ at the same value (i.e., standard price) of a serviceable item. However, an allowance for repairs contra-asset account shall also be established to record the estimated cost of the repair and the surcharge associated with the exchanged item. The net of the DLR in transit amount and its allowance account shall equal the value of the carcass (see paragraph N.4. for an illustration of this process). e. Valuation Illustration. As noted above, for financial statement presentation, DBOF supply management business areas maintaining inventory values at standard [selling] price must adjust the inventory values at standard [selling] price to latest acquisition cost. Addendum 2, paragraph B.10., of this chapter provides an example of the month end adjustment process. Basically, the procedure to revalue inventory to its latest acquisition cost is to deduct the operating cost recovery amount and, if applicable, the prior year inflation amount from both the inventory at standard price value and the allowance for holding gain and loss account. This procedure should be applied only to the inventory financial classifications of “Inventory Held for Sale,“ “Inventory Held for Future Sale,“ and “Inventory Held for Repair.“ Inventory reported as “Inventory - Excess, Obsolete, and Beyond Repair,“ should be recorded at its net realizable value and therefore does not have an allowance account associated with it. As an illustration, assume that the operating cost recovery percentage for all financial inventory categories was equal to 15 percent of the standard price. In that case, the following would result (accounting entries are illustrated in Addendum 2, paragraph B.10.): 55-15
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Supply Management Operations - Comptroller

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