BRIEF

Policy Summary

This policy describes the requirements for accounting for inventories at Lawrence Berkeley National Laboratory (Berkeley Lab) to ensure adherence to DOE inventory accounting requirements.

Who Should Read This Policy

This policy applies to all employees who establish, monitor, or report on inventories at Berkeley Lab.

To Read the Full Policy, Go To:

The POLICY tab on this wiki page

Contact Information

General Accounting Manager

POLICY

A. Purpose

This policy describes the requirements for accounting for inventories at Berkeley Lab to ensure adherence to DOE inventory accounting requirements.

B. Persons Affected

This policy applies to all employees who establish, monitor, or report on inventories at Berkeley Lab.

C. Exceptions

This policy does not apply to assets accounted for as property, plant, and equipment. See the Property, Plant and Equipment (PP&E) and Internal Use Software (IUS) Policy.

D. Policy Statement

1. General

   Berkeley Lab accounts for inventory as an asset on the balance sheet, in compliance with DOE Financial Management Handbook Chapter 9. There are three primary types of inventory: precious metals, nuclear materials, and operating materials. 

2. Inventory Types
   1. Precious Metals. Precious metals like gold, silver, palladium, platinum, palladium, rhodium, iridium, ruthenium, and osmium should be accounted for as inventory regardless. Berkeley Lab will draw precious metals from DOE Business Center for Precious Metals Sales and Recovery (BCPMSR) unit as needed. Whenever DOE BCPMSR does not have required quantity or form of metal, Berkeley Lab will procure the metals as needed following required protocols.
   2. Nuclear Materials Inventory. Berkeley Lab has accountability for the counting and reporting of materials on hand to the National Nuclear Security Administration Service Center (NNSA). DOE Headquarters records annual adjustments to inventory on behalf of Berkeley Lab. Nuclear Materials should be accounted for as Inventory regardless of their value.
   3. Operating Materials
      1. Operating materials consist of tangible personal property to be consumed in operations. Examples include stockroom supplies as well as spare parts inventories. Operating materials meeting the threshold in the section iv below are accounted for using the consumption method, which requires that inventory balances be accounted for on the Laboratory’s financial statements. 
      2. Operating materials exclude items that meet the criteria to be classified as plant, property, or capital equipment. See the Property, Plant, and Equipment (PP&E) and Internal Use Software (IUS) Policy. 
      3. Operating materials that do not meet the materiality threshold are accounted for by using the purchase method, which allows items to be expensed when purchased. However, if operating materials pose a danger to the environment, or are subject to pilferage, misuse, or destruction, Laboratory divisions are responsible for ensuring that the necessary physical controls are in place to protect the items with consideration for cost-benefit, risk, and other factors.
      4. Materiality Thresholds for Operating Materials 
         1. Total value held at the division level and $500,000;
         2. Per unit value of the items and $10,000 or more;
         3. Materials that will be consumed over a period which exceeds 90 days.
3. Establishment of Inventory Balances on the Financial Statements
   1. DOE requires that inventory must be funded from a specific appropriation established to support missions specified for that appropriation. That is, all inventories (even an inventory funded to support indirect activities) must be associated with a direct funded Budget and Reporting (B&R) code.
   2. For direct funded projects/operations, the funding source for the project/operations will be the funding source for the inventory balance. For indirect funded activities, an appropriate funding source must be identified for the inventory balance. If one cannot be identified, then the inventory balance must be maintained below the materiality threshold established by this policy.
   3. Establishing an Inventory. To establish a new inventory balance on the balance sheet, contact General Accounting to help coordinate a plan and schedule to track inventory based on the requirements in DOE Financial Management Handbook Chapter 9.
   4. Acquisition Valuation
      1. Acquisitions to inventory are valued at historical cost. 
      2. Transferred inventory is recorded at actual cost or standard transfer value when a standard transfer value has been established.
4. Consumption. Inventory is expensed as it is consumed at historical weighted-average cost.
5. Return of Previously Issued Items
   1. New items previously issued from inventory that are returned in new/unused condition are valued at the current unit cost for like items at the time of return.
   2. If used items that have been returned to inventory can be reused without being reworked, the returned items are valued at their fair value at the time of return. If they are reworked, value the items as new items and expense any excess rework cost.
6. Physical Inventory Requirements
   1. Physical inventories will be performed annually per the requirements of 41 CFR 109–1.5110, Physical Inventories of Personal Property, while Stores inventories will be performed in accordance with 41 CFR 109-1.5108-3, and Precious Metals will be performed in accordance with 41 CFR 109-1.5108-4.
   2. Physical inventory records will include item descriptions, location of items, dollar values, and quantity for the items being controlled. Records of physical inventory counts and related reconciliations, when completed, will be forwarded by the Laboratory division/inventory owner to General Accounting. If necessary, the division will also provide General Accounting with support to make any adjusting entries to bring physical and financial records into agreement.
7. Excess, Obsolete, and Unserviceable Inventory. Operating materials inventory identified as excess, obsolete, or unserviceable should be revalued at an expected net realizable value. The difference between the carrying amount of the inventory and its expected net realizable value is recognized as a gain or loss and separately reported. Any subsequent adjustments to the net realizable value or any gain or loss upon disposal will also be recognized as a gain or loss.
8. Allowance for Loss or Valuation. Operating materials allowances will be booked to recognize reasonably anticipated, material financial losses in inventory. The inventory and operating materials allowance accounts will be separately reported on financial statements.
9. Liquidation of Inventory Balances on the Financial Statements. Should operating materials inventory values fall below the materiality threshold, the Laboratory division will meet with Controller's Office personnel to determine a path forward. If the decrease in value is considered to be temporary and there is an expectation that the inventory value will meet the materiality threshold within the next 12-month period, the Controller's Office can approve a continuation of the balance as an asset in the financial statements. If the decrease in value is permanent and there is no reasonable expectation that the value will again exceed the materiality threshold, the Controller's Office will work with the division to develop a plan for liquidating the inventory balance in the financial statements.
10. Reporting for Operating Materials Inventory
    1. Berkeley Lab must also make required financial statement disclosures applicable to inventory when maintained on the balance sheet, including:
       1. General composition of the inventory and materials.
       2. Basis for determining values (valuation method and cost flow assumptions).
       3. Changes from prior year's accounting methods, if any.
       4. Balances for specified inventory types and subcategories.
       5. Restrictions on the sale or use of inventory and materials, if any.
       6. Decisions criteria (and changes in these criteria) for identifying the category (or subcategory) to which inventory and materials are assigned when applicable.
    2. Inventory when maintained on the balance sheet must be broken down into the following subcategories, when applicable:
       1. Inventory held in reserve for future sale.
       2. Excess items.
       3. Obsolete and unserviceable items.
       4. Inventory held for repair.
       5. Operating materials held for future use.

E. Roles and Responsibilities

F. Definitions/Acronyms

G. Recordkeeping Requirements

None

H. Implementing Documents

None

I. Contact Information

General Accounting Manager

J. Revision History

DOCUMENT INFORMATION

Source Requirements Documents

• DOE Financial Management Handbook, Chapter 9
• 41 CFR 109–27.51—Management of Precious Metals
• 41 CFR 109-1.5108-3 – Stores inventories
• 41 CFR 109-1.5108-4 -- Precious metals