Telephone Company like World Call or GT issue prepaid calling cards
to customer ,If at year end they have piles of prepaid calling cards
awaiting to be sold, how do they value them ?
Anything bought with the intention of resale & anything produced with the intention of selling is 'stock'.
So I guess they should value it as stock with the proper stock valuation method.
hi
I were faced with such a client....I will pay no attention to calling cards at all.
I will ask them to let me have a schedule of how much calling time was bought before the year end and how much of this is unused. Ensure cut off is correct.
Then value the unused time bought in line with standard on stock valuation. refer to the discussion on this issue which is within this forum somewhere.
Thanks
zubair
Zubair is right in so far as the valuation is concerned.
Prepaid cards NOT SOLD represent revenue capacity but do not have any intrinsic value unless activated. An activated prepaid card can be loaded/charged and is like cash. The cost of this cash to the company is not the cost of material of the card but the future USE OF NETWORK by the user when such card is loaded into the company's systems.
There is no need to value something which has no cost. However as part of the audit procedures and company's internal controls a full fledged system of inventory control should be implemented which tracks these cards from receipt from printing company to the ultimate sale to the consumer.
I hope it clarifies