Industry characteristics
- Raw materials, labour and overhead are interwoven and must be allocated across processes;
- Many inventory types and batches make reconciliation difficult;
- Firms with R&D activity need a clear separation between research and production.
Key exposures
- Costs carried over on estimates, distorting real product margins;
- Inventory that has long diverged from the records, with gaps compounding;
- R&D costs merged with production costs, undermining the aggregation basis for the super-deduction;
- Non-standard tax treatment of environmental, safety and other special expenditures.
How we work
- Establish cost aggregation rules by product and process so costs become calculable;
- Standardise inventory accounting and stocktaking, with a clear basis for handling variances;
- Set up separate records for R&D projects, staff and costs to support policy applications;
- Review the tax treatment of special expenditures so positions stay consistent.