Informational article – Bússola Digital – Accounting & Consultancy, Sole Trader (ENI)
Inventories are a crucial part of the financial position of entities that trade goods. We will explain in a simple and clear way how they should be recognised, measured and presented under the Portuguese Accounting Standard System (SNC).
Inventories are assets held for sale, in production, or to be consumed in the production process.
They include goods, raw materials, finished products and by-products.
Recognition occurs when the entity obtains economic control of the goods — it does not depend on the invoice date.
Typical examples:
• Physical receipt of goods
• Transfer of risks and rewards
• Contractual conditions (Incoterms, delivery terms, etc.)
Inventories are recorded at acquisition or production cost, including:
• Purchase price
• Transport costs
• Directly attributable costs
They are subsequently measured at the lower of cost and net realisable value.
The SNC permits:
• FIFO (First In, First Out)
• WAC (Weighted Average Cost)
LIFO is not permitted.
• Perpetual Inventory System (PIS) – continuous recording of inventory inflows and outflows.
• Periodic Inventory System (PIS) – determination carried out only at the end of the period.
When the net realisable value is lower than cost, an impairment loss must be recognised, adjusting the value of inventories.
The entity shall present:
• Measurement policies
• Amounts by category
• Impairment losses recognised and reversed
• Inventories held by third parties
The proper treatment of inventories ensures the reliability, comparability, and transparency of financial statements — essential pillars for decision-making and for the credibility of accounting information.
Context
Auto Agora purchases 100 units of a product for resale.
Purchase data:
• Unit price: €10
• Transport: €50
• Trade discount: €20
• Non-deductible VAT: €0 (it is deductible, therefore not included in cost)
Total cost = (100 × €10) – €20 + €50 = €1,030
Unit cost = €1,030 / 100 = €10.30
The company sells 40 units.
Custo das vendas = 40 × 10,30 € = 412 €
Closing inventory = 60 units × €10.30 = €618
At the end of the period, the selling price has decreased and the NRV per unit is now €9.80.
As the NRV (€9.80) is lower than the cost (€10.30), there is an impairment:
Impairment = (€10.30 – €9.80) × 60 = €30
Final inventory after impairment = €618 – €30 = €588
• How to calculate acquisition cost
• How to apply FIFO
• How to determine the cost of sales
• How to recognise impairment when NRV is lower than cost
March 2026
