Specific Identification Inventory Valuation Method

Posted in Operations and Supply Chain Terms, Total Reads: 1036
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Definition: Specific Identification Inventory Valuation Method

It is a method that allows tracking of all items in the inventory. It allows the investors to decrease or offset any resulting capital gains by picking a specified bunch of securities which are used as a basis for the sale.

It is a method which is based on identifiable inventory items and hence is used in cases where the individual items can be clearly identified with a receipt date or serial number. In most cases it is used for large items like vehicles or furniture. The other requirements of this system are –

• Ability to track each item individually

• Ability to track the cost of each item individually

• Ability to relieve inventory for a given cost associated with the item which is sold.

This method leads to a higher level of accuracy as the exact cost at which an item is purchased can be recorded and then charged to the COGS when the item is sold. At the same time, it is rarely used as it is time consuming and costly and is restricted to only high value items where differentiation is possible and required.

 

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