Companies Act 1985

Valid from 01/03/1997

Section B E+W+S Historical Cost Accounting Rules

Determination of purchase price or production cost E+W+S

F1 27 (1) Subject to the qualification mentioned below, the purchase price or production cost of—

(a) any assets which fall to be included under any item shown in a small company’s balance sheet under the general item “stocks”; and

(b) any assets which are fungible assets (including investments);

may be determined by the application of any of the methods mentioned in sub-paragraph (2) below in relation to any such assets of the same class.

The method chosen must be one which appears to the directors to be appropriate in the circumstances of the company.

(2) Those methods are—

(a) the method known as “first in, first out” (FIFO);

(b) the method known as “last in, first out” (LIFO);

(c) a weighted average price; and

(d) any other method similar to any of the methods mentioned above.

(3) For the purposes of this paragraph, assets of any description shall be regarded as fungible if assets of that description are substantially indistinguishable one from another.

Textual Amendments

F1 Sch. 8 substituted (1.3.1997) by S.I. 1997/220, reg. 2(2), Sch. 1

Substitution of original stated amount where price or cost unknown E+W+S

F2 28 Where there is no record of the purchase price or production cost of any asset of a small company or of any price, expenses or costs relevant for determining its purchase price or production cost in accordance with paragraph 26, or any such record cannot be obtained without unreasonable expense or delay, its purchase price or production cost shall be taken for the purposes of paragraphs 17 to 23 to be the value ascribed to it in the earliest available record of its value made on or after its acquisition or production by the company.

Textual Amendments

F2 Sch. 8 substituted (1.3.1997) by S.I. 1997/220, reg. 2(2), Sch. 1