Features of materials evaluation in tax accounting

In the dynamic environment characterized by changes in tax legislation and increased significance of tax planning, proper accounting and valuation of materials for legal entities are critical due to their substantial impact on the taxable base. Errors in tax accounting of materials, constituting a considerable portion of total costs, can lead to misrepresentation of taxable income. This study addresses challenges associated with valuing incoming materials for tax purposes and evaluates various methods used for depreciation (FIFO, weighted average cost, specific identification). It also compares differences between tax and financial accounting practices regarding materials, such as timing of expenditure recognition, inclusion of costs into actual production costs (including contingent liabilities, freight and handling charges, loan interests). Furthermore, it discusses unique aspects and discrepancies in accounting treatment of materials acquired through donations, disassembly or demolition of fixed assets, inventory surpluses, and other exceptional circumstances. Documentary requirements for recording materials in both financial and tax accounting are outlined. Special attention is given to Value Added Tax (VAT) reclaimable from suppliers at the time of purchasing stocks. Additionally, this research elaborates on nuances of materials' tax accounting under different tax regimes—general and simplified—and formulates recommendations for further improvements.