Have you ever wondered how to perform a physical stock count a dunghill or a herd of cows? How to account a newborn calf and when does a cow become a property?
The auditor's work is not only about sitting all day in the office and routine checking of client`s numbers. During the audit, we also participate a physical stock count. Stocktakings at agriculture companies are ones of more interesting.
Everybody can imagine how to count goods stored in boxes in stock. Also cows or sheep are not a big issue. However, if the company needs to count or calculate stock of dung but also e.g. barley or corn it is more complicated. It is necessary to imagine a dunghill as a geometric shape, to estimate its length, height and width, and to calculate the volume using a formula.
Similarly, counting seedlings on a multi-hectare field may seem to be a bit “abstract”. Clients usually use the approach of multiplying the approximate number of seedlings per square meter and the field area.
Another difficulty can be valuation of animals. What is the value of a newborn calf or its weight gain? And when does the stock become a property? See the “life story” of one cow…
Purchased animals are valued at the actual purchase price increased by related costs – e.g. the transport.
Additions of a value of animals are done for each single animal:
A fixed calculated price is determined for accruals of the livestock (e.g. newborn calf).
The value for transfer the animals from livestock to fixed assets (e.g. from the category advanced pregnant heifer to the category dairy cow) and for asset depreciation is determined as follows: newborn price + price of weight gain in category calf + price of weight gain in category young heifer + price in category advanced pregnant heifer.
As you can see, although there are many prejudices about the attractiveness or creativity of the auditor's work, they are actually very easily rebuttable. Let the physical stocktaking and stock valuation in agro-plants be the best proof!