Business Accounting Essay: Inventory Analysis for Harris Technology

This essay examines the inventory accounting practices of Harris Technology Group Limited, a company engaged in technology distribution and online retailing in Australia. It analyzes the company's compliance with AASB 102, Inventory, including the classification and measurement of inventory. The essay explores the perpetual inventory system used by the company and its benefits, highlighting its suitability for large organizations with complex procedures. Furthermore, it identifies the latest purchase price method as the costing method adopted by the company, explaining its advantages in providing up-to-date replacement cost valuations. The essay also notes the importance of choosing an appropriate valuation method and the factors influencing this decision. Finally, it concludes by emphasizing the significance of accurate inventory measurement and recording for transparent financial reporting. The essay references Australian Accounting Standards Board documents and the company's annual reports to support its analysis, offering insights into the company's financial practices. The essay provides a comprehensive overview of inventory management within the context of Australian accounting standards, specifically focusing on the case of Harris Technology Group Limited.

07 February 2019
Business Accounting
Harris Technology Group Limited

ESSAY 1
The company Harris Technology Group Limited is engaged in the business of the technology
distribution and the online retailing in Australia. The company was found in the year 1986,
and engages in the online retail sale of baby and mother care products and IT products (Harris
Technology Group Limited, 2019). In addition, the company is involved in the import and
distribution of the computer accessories to resellers and retailers. The company operates
through the two chief online chains namely the “Harris Technology” and the “Wow Baby.”
The following segment aims at describing the company’s compliance with the reelevenat
accounting standard for the inventory. The accounting standard AASB101 Presentation of
Financial Statements, states the current assets to be the assets, which are held by the company
for the primary purpose of selling (AASB, 2015a). In addition, these include the assets, which
the company expects to be sold, consumed, or realised in the company’s normal operating
cycle. Further, the current assets are inclusive of the assets that the entity expects to realise
within the twelve months after the reporting period. Thus, as per the definition, the inventory
is to be classified as the current assets. Accordingly, the company Harris Technology Group
Limited classifies its inventory as the current assets. The AASB 102, Inventory in financial
reporting and business practices in Australia, governs the recognition, accounting treatment,
classification and the presentation of the inventory (AASB, 2015b).
The paragraph 6 of the AASB 102 defines the term inventory to be the assets held by the
entity for the purpose of sale in the ordinary course of its business operations. The inventory
definition is also inclusive of the assets held for the production of the above stated and the
consumables to be used in the various processes. The paragraph 8 of the said accounting
standard further prescribes the assets purchased and held for resale. Thus, the major
inventories of the company include the computers, accessories, printers, computer
peripherals, software, mobiles, and tablets under the technology domain. The inventory in
mother and baby care domain includes the baby accessories, toys, baby furniture, travel
essential, and others. The company primarily holds these for the purpose of retailing and
reselling, thus connecting the suppliers and the customers to each other. Thus, it can be stated
that the recognition of the products held for resale as the inventory are in accordance with the
compliance with the AASB 102. The measurement of the inventories is governed by the
paragraph 9 of the accounting standard. The paragraph states that the inventory must be
measured at the lower of cost and net realisable value. The inventory held by the company as
on 31 December 2017, as per the half-year reports and the annual accounts was $ 6,127,805

ESSAY 2
(Harris Technology Group Limited, 2018). The company states the measurement to be in
compliance with the AASB 102.
The following segment describes the inventory system applied by the entity and benefits of
the same. The inventory system that the company uses to value its stock is the perpetual
inventory system. The perpetual inventory system makes use of the computerized point-of-
sale systems and the asset management software to keep the track of the sale and purchase of
the inventories, immediately at the time of the occurrence of the same. The fact that the
system provides the real time data of the position of the stock in hand is what sets it apart
from the traditional periodic inventory system. The entity Harris Technology Group Limited
being large in size and having the complex set of procedures are most suited with the said
computerised inventory recording system. This is because keeping the track of varied range
of inventories is not possible manually in large organisations.
The following segment is the description of the costing method adopted by the company. The
inventory is regarded as one of the most essential elements of the financial statement of the
company. Depending on the nature and size of the business operations, the entity decided to
value its inventory from one of the various valuation methods available. The costing method
that has been employed by the company Harris Technology Group Limited for the purpose of
inventory valuation is the “latest purchase price method.” The inventory of the company as
stated in the annual report is mainly comprised of the finished goods that are held for resale.
As per this method, the valuation of the inventories are done at a price which is the probable
quote of the price of the goods, that are to be received by the entity next to the issue of the
inventory. Thus, the method does not values the stock at the historical cost already incurred.
The main advantage of the method is that the valuation of the stock is made at the up-to date
replacement cost.
It must be significantly noted that the choice of the method of valuation of the inventory is a
management decision. However, the same must be taken after the evaluation of the pros and
cons of each of the methods (Christopher, 2016). This is because each of the valuation
method yields different results in different scenarios. The chief methods that are being widely
used by the entities for the inventory valuation are the First in first out (FIFO) method, the
Last in first out (LIFO) method and the Weighted Average Cost method. For instance, if there
is price inflation and the entity employs the FIFO method for the valuation of the inventory,
the value of the closing stock would be high in FIFO as compared to the LIFO (Wild, 2017).

ESSAY 3
Another instance is that the existence of the perpetual inventory system is must for the entity
to adopt the moving average method of valuation of inventory. This is because the ready
average cannot be calculated on the periodic basis to price the inventory on average basis.
Thus, it can be stated that the choice of the system of valuation method is largely dependent
upon a number of incidental factors that is the budget of entity, the infrastructure, and
expertise available, the size and the complexity of operations and others.
The discussion in the previous parts aid to conclude that the inventory being one of the most
valued asset of the entity must be carefully measured and recorded in the books of accounts,
to enable the stakeholders gain transparent information.

ESSAY 4
References
Australian Accounting Standards Board (2015a) AASB 101 Presentation of Financial
Statements
[online] Available from: https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-
15.pdf [Accessed on: 07/02/2019].
Australian Accounting Standards Board (2015b) AASB 102 Inventories [online] Available
from: https://www.aasb.gov.au/admin/file/content105/c9/AASB102_07-15.pdf [Accessed on:
07/02/2019].
Christopher, M. (2016) Logistics & supply chain management. UK: Pearson
Harris Technology Group Limited (2018) Appendix 4D and Half- Year Report [online]
Available from: https://www.asx.com.au/asxpdf/20180228/pdf/43s1g9vx1wr54z.pdf
[Accessed on: 07/02/2019].
Harris Technology Group Limited (2019) Harris Technology Group Limited Shopping
Network [online] Available from: http://ht8.com.au/online-shopping [Accessed on:
07/02/2019].
Harris Technology Group Limited (2017) Annual Report 2017 [online] Available from:
https://www.asx.com.au/asxpdf/20170927/pdf/43mplnl1hr7df1.pdf [Accessed on:
07/02/2019].
Wild, T. (2017) Best practice in inventory management. UK: Routledge.