Valuation of Inventories According to Commercial and Tax Law

1. Fundamental Terms

Current assets primarily include assets (economic goods) intended for sale. In the context of production, the raw materials, as well as auxiliary and operating materials required for this, are part of the current assets. In accounting, the overarching term inventories is used for such assets. As a merchant, you are required to conduct a physical inventory of the stock assets at the balance sheet date.

2. Valuation According to Commercial and Tax Law

In the German Commercial Code (HGB), the lower of cost or market principle must be applied. Acquisitions are to be recorded at the purchase price. Work in progress is to be recorded at production costs. The principle of individual valuation applies to the valuation of inventories. The tax production costs partially differ from commercial law. It must be examined in each case whether the relevance of the commercial balance sheet for the tax balance sheet is to be applied.

2.1 Special Features of Individual Costs

2.1.1 Input Tax Amounts

Input tax amounts deductible under the Value Added Tax Act do not count as production costs. If the entrepreneur is not entitled to deduct input tax, the input tax counts as production costs.

2.1.2 Material Overhead Costs and Manufacturing Costs

Material overhead costs and manufacturing overhead costs include expenses for cost centers such as warehousing, transport, and inspection of manufacturing materials.

2.1.3 Depreciation of Fixed Assets

The depreciation of fixed assets that have served production is to be recorded with the depreciation amount.

2.1.4 Costs for General Administration

General administration costs include expenses for areas such as management, purchasing and goods receipt, works council, and accounting.

2.1.5 Expenditures for Social Facilities

Expenditures for social facilities include costs for the canteen, meal subsidies, and employees' leisure activities.

3. Methods for Determining Production Costs

The determination of production costs can be carried out under various capacity levels. Calculation methods include division calculation, equivalence number calculation, and process costing. These methods exclude imputed costs.

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Legal status: June 2025. All information is provided without guarantee and does not replace individual consultation.