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Booking of product certifications

Hello,

the following situation: We are a company required to prepare financial statements and import electronic items from China. We are the importer and therefore also the manufacturer of the product.

For some of these items, we need a special certification so that they can be used in vehicles. This is called an E-marking. The supplier in China can provide us with this certification, but charges a one-time fee of 4000 euros per successful certification. We regularly order these items, but only in small quantities (50-100 pieces). Price per item is approximately 30-60 euros.

Now my question is, how should the costs for these certifications be recorded? Are they considered operating expenses or should these costs be recorded under the account of cost of goods sold or cost of goods purchased?

If recorded under the account of cost of goods sold or cost of goods purchased, how would the value of the goods be calculated during inventory? For example, if I have 10 of these items worth 300 euros in inventory as of the inventory date, would the full amount for the certification (4000 euros) be added, making these 10 items worth 4300 euros? How should this be accurately represented, and what are the possible options?

Thank you.

Kind regards,

Wirtschaftsprüfer André Hintz

Dear inquirer,

I would like to answer your question within the scope of an initial consultation and in accordance with the rules of the online portal, considering your fee contribution. My response is based on the situation you have described.

Single certificate:

A single certificate is an intangible asset.

The certificate is included in the fixed assets and depreciated over the normal useful life. The useful life corresponds to the time during which you are allowed to use the certificate. For example, if the certificate is valid for 5 years, it will be depreciated over 5 years.

Certificate for each order:

However, if the certificate is due with each order, it is part of the acquisition cost of the order quantity and must be evenly distributed across all units.

For example, if 100 units are ordered at a cost of 60 €/unit plus 4,000 € for the certificate, then each unit costs 460 € and is booked as cost of goods sold when sold.

If you have any further questions, please feel free to contact me.

I hope my explanations have been helpful and remain

Yours sincerely,

André Hintz
Tax consultant
Steuerberatung@andrehintz.de

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Wirtschaftsprüfer André Hintz