Section EB 7 — Income Tax Act 2007: Cost allocation: cost-flow method

EB 7 Cost allocation: cost-flow method When this section applies: first case (1) This section applies when a person who determines the value of their closing stock at cost has items of trading stock that are not separately identifiable. Compulsory use of cost-flow method (2) The person must use 1 of the cost-flow methods described in subsection (5) to identify the items of trading stock included in closing stock and to determine the cost of the items. When this section applies: second case (3) This section also applies when a person who determines the value of their closing stock at cost has items of trading stock that are separately identifiable. Discretionary use of cost-flow method (4) The person may use 1 of the cost-flow methods described in subsection (5) to determine the cost of the items of trading stock. Cost-flow methods (5) The cost-flow methods of allocating costs are— (a) the first-in first-out cost method; and (b) the weighted average cost method. Consistent use (6) A person who determines the value of their closing stock at cost must use the same cost-flow method of allocating costs as they use in their financial statements for the income year. Defined in this Act: closing stock , cost , financial statements , income year , , trading stock Compare: 2004 No 35 s EB 7