WIP and raw materials inventories.

• Author: Sterling, David
• Position: Inventory tax accounting

According to Rev. Proc. 77-12, WIP inventories should be valued in the same manner as finished goods inventories, reduced by the expected costs of completion and a reasonable profit for the completion process.

Rev. Proc. 77-12 states that raw material inventories should generally be valued at current replacement cost. However, if a raw material inventory would be difficult to replace in a short period of time, it may have a value that exceeds its current replacement cost (because it provides continuity of business). On the other hand, the value of obsolete raw materials may be less than their...