[Jewelry making - Article 00106] - Re: [Orchid] Dealing with the increase in metal prices...

[Kimberly Starbard]

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Hi:

>     To restate the value of the cost of goods sold at a higher price
>     likely violates what we in Canada call GAAP or Generally Accepted
>     Accounting Principles. To do so would understate your revenue from
>     sales, 

    I believe the first statement is referring to marking up the retail
    price of what's already on the floor.To violate GAAP would be to go
    back to the cost of your material (the price you paid when you bought
    the gold/silver) and remark that to reflect current cost. It's
    actually not against GAAP, so to speak, it's that you have to file a
    form (in the US anyway) to request "a change in accounting principle"
    in this case going to from what is called LIFO or FIFO to Lower of
    Cost or Market. This change in accounting principle would normally be
    requested if you had purchased a significant amount of raw material
    at very high prices....then the market price fell. Since you had paid
    very high prices and are now carrying inventory at a cost that is a
    lot higher than the current market value, you would want to employ
    Lower of Cost or Market to declare your loss and lower taxable
    income. Complicated stuff and the need for a CPA is stressed
    here...what to say to the CPA at tax time is "I paid a lot for my
    gold at the beginning of the year and I still have a lot of it in
    stock, is there anything that can be done?" 

    A link:
    www.irs.gov/businesses/small/industries/article/0,,id=100355,00.html 

    However, remarking your current retail prices is actually what I had
    a question on. For those who have retail stores, does a store owner
    have to notify the customers (put a sign up) that prices of jewelry
    are based on current prices (cost) of materials and that the prices
    on the jewelry can go up (or down....just kidding) based on the
    current market price of gold/silver etc? 

    I hope I made sense and didn't put everybody to sleep

Kim Starbard
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