The valuation of inventory in Montenegro is regulated by the Accounting Law, as well as the Regulation on the Methodology for the Valuation of Property, in accordance with the application of International Financial Reporting Standards:
- IFRS 2 – Inventories
- IFRS 36 – Impairment of Assets
as well as International Valuation Standards for inventories:
- IVS 230 – Inventories
Inventory of materials, goods, work in progress, and finished products represents the most significant part of business assets in most companies and the largest item in financial statements.
A professionally conducted valuation of inventory is important because:
- It can help maximize profitability;
- Ensures accurate representation of inventory value in a company’s financial statements;
- The method of inventory valuation directly affects the selling price of goods, gross revenue, and the monetary value of remaining inventory;
- Valuing remaining inventory affects the potential value of the company;
- The method used for inventory valuation directly impacts gross profit and the income statement, providing companies and investors with an insight into financial performance.
Our team uses various valuation methods depending on the approach to valuation:
1. Market approach:
- Direct comparison method
2. Income approach:
- Top-down method
- Bottom-up method
3. Cost approach:
- Amortized cost replacement method
- Cost reproduction method
In our many years of practice, we have identified numerous irregularities in inventory balancing and valuation that carry over into subsequent years of operation. Therefore, it is extremely important that inventory valuation be conducted by a professional team with extensive experience in this field.