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EB 5: Transfers of trading stock within wholly-owned groups
or “How stock transfers between companies in the same group are treated for tax purposes”
You could also call this:

“How to value your closing stock at cost”

You can decide to value your closing stock at cost. If you choose this method, you need to include and allocate costs according to generally accepted accounting practice or as described in a special rule.

If you use a specific accounting standard called NZIAS 41 for your trading stock in your financial statements, you must value your closing stock at cost. You also need to include and allocate costs so that the value of your closing stock is not very different from the value you would get if you used another standard called NZIAS 2, but ignoring one part of it.

When valuing at cost, you haven’t followed the rules if the value of your closing stock is very different from what you’d get if you used NZIAS 2 or a similar standard.

NZIAS 41 is a special accounting rule for agriculture that is part of the Financial Reporting Act 2013. This rule might change over time, or be replaced by a similar one.

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Next up: EB 7: Cost allocation: cost-flow method

or “How to choose and use a method for valuing your trading stock”
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Part E Timing and quantifying rules
Valuation of trading stock (including dealer’s livestock)

EB 6Cost

  1. A person may determine the value of their closing stock at cost. If the person chooses this method, they must include and allocate costs under generally accepted accounting practice or as described in subsection (1B)(b).

  2. Despite subsection (1), a person who uses NZIAS 41 for their trading stock in their financial statements must—

  3. value their closing stock at cost; and
    1. include and allocate costs so that the value of their closing stock is not materially different from the value of the closing stock obtained by applying NZIAS 2, ignoring paragraph 20 of NZIAS 2.

      1. For the purposes of subsection (1), the person has not complied with generally accepted accounting practice if the value of closing stock is materially different from the value obtained by applying, to the closing stock, NZIAS 2 or an equivalent standard issued in its place.

      2. In this section, NZIAS 41 means New Zealand Equivalent to International Accounting Standard 41, in effect under the Financial Reporting Act 2013 as amended from time to time, or an equivalent standard issued in its place.

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      Notes
      • Section EB 6(1): amended, on , by section 349(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(1B) heading: inserted, on , by section 349(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(1B): inserted, on , by section 349(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(2): amended, on , by section 349(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(3) heading: inserted, on , by section 349(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(3): inserted, on , by section 349(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6(3): amended, on , by section 126 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
      • Section EB 6 list of defined terms NZIAS 2: inserted, on , by section 349(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
      • Section EB 6 list of defined terms NZIAS 41: inserted, on , by section 349(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).