We have written down obsolete inventory gradually. For example, we have 
books that have been sitting in inventory for 10 years that had an 
original cost of $17. We now sell maybe 25 a year but have 700 on hand. 
We have written the cost down (by making inventory cost adjustments) 
over the past 4 years until we are now carrying them at a cost of about 
$4. There is no determined formula other than a sense of how the value 
has changed over time but our auditor is comfortable with that.

Good luck.

Betsey

Jay Smith wrote:
>
> To All:
>
> Our museum is owned and operated by a municipality that just completed 
> its annual audit, in which the auditor cited the Museum for failing to 
> have a depreciation formula in place for items in the Gift Shop 
> Inventory that had not sold – some of which could be as old as 7-10 
> years. These “older” items remain on our books at their original 
> valuation from our vendors. The audit finding indicates that these 
> items inflate the value of the gift shop inventory and due to age are 
> not reflective of their respective fair market value(s).
>
> Just for some context, we are not talking about a large dollar value 
> of our inventory, and the items are fairly common stock such as signed 
> prints from artists, postcards, some books, and t-shirts from a 
> blockbuster exhibit from several years ago. Additionally, these are 
> items that, primarily, are materials inherited from the transfer of 
> ownership from a private business to municipal management that 
> occurred just shy of five years ago.
>
> We will be trying (hopefully) to sell the materials in question at a 
> discounted rate (the easiest answer) but it is difficult to imagine 
> that we will move all of the items (especially the postcards). I 
> understand that a typical for-profit business would write off the 
> materials, or but municipal regulations will not allow that practice.
>
> So my question to you all is this: Does anyone employ a depreciation 
> formula for GIFT SHOP ITEMS or items purchased with the intent of 
> resale? Additionally, I would like to know if anyone uses software 
> that includes a depreciation formula in its gift shop program?
>
> Thank you all in advance for your input and assistance, and please 
> feel free to reply offline at [log in to unmask] <mailto:[log in to unmask]>
>
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