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The Laws of Fiji
Last Updated: 1 April 2022

[IT 40] Trading stock40 

40
(1) The amount that a person is allowed as a deduction for a tax year for the cost of trading stock disposed of during the year is computed in accordance with the following formula—
(A + B) – C

where—

Ais the opening value of the trading stock of the person for the year;
Bis the cost of trading stock acquired by the person in the year; and
Cis the closing value of trading stock of the person for the year.
(2) The opening value of trading stock of a person for a tax year is—
  • (a)the closing value of the trading stock of the person for the previous tax year; or
  • (b)if the person commenced business in the year, the value of any trading stock acquired by the person prior to the commencement of the business.
(3) The value referred to in subsection (2)(b) is the lesser of—
  • (a)cost of the trading stock; or
  • (b)the fair market value of trading stock determined at the time the trading stock is brought into the business.
(4) The closing value of the trading stock of a person for a tax year is the lower of cost or fair market value of the trading stock of the person on hand at the end of the year.
(5) A person accounting for Income Tax purposes on a cash basis may compute the person’s cost of trading stock under the prime-cost method or absorption-cost method, and a person accounting for Income Tax purposes on an accrual basis must compute the person’s cost of trading stock under the absorption-cost method.
(6) If particular items of trading stock cannot be readily identifiable, a person may account for that trading stock under any method recognised under generally accepted accounting principles, but the last-in-first-out method may not be used.
(7) If a person disposes of trading stock outside the ordinary course of business, including as part of the sale of a business—
  • (a)the consideration for the disposal; and
  • (b)the cost for the person acquiring the trading stock,

is the fair market value of the trading stock at the time of disposal.

(8) In this section, “absorption-cost method”, “last-in-first-out method”, and “prime-cost method” have their meaning under generally accepted accounting principles.