Do you own operate or work for a winery? If so it is important to augment your understanding of winery accounting and finance issues. This article covers winery accounting, inventory costing, vineyard accounting and taxation. No one is born with an innate knowledge of accounting—although it can be argued that some of us caught on while we were still in diapers. Understanding it takes education and training, and making it interesting is an even bigger challenge.
Winery accounting and vineyard financial operations are by no means simple matters. If you are a winery owner or manager is is essential to make sure that bookkeeping and accounting staff understand the unique accounting needs facing the wine industry and provide step-by-step approaches to solving the daily challenges faced in the wine and vineyard industry.
Dollar Value, Last In First Out or LIFO for short is an integral component of winery accounting. LIFO first was accepted seven decades ago for most accurately reflecting net income for industries with rapid inflation in pricing for inputs, and the wine business started using it three decades back.
For businesses heavily affected by inflation, such as the cost of choice wine grapes in recent years, LIFO provides a way to defer taxes.
Trouble is, if a winery that defines its pool items too broadly – common items can be as general as “bulk wine” and “case goods” – the IRS can require use of the Bureau of Labor Statistics inflation index for wineries, which is usually a few percentage points and based on cost bases for large wineries.
Making sure that your bookkeeping and accounting staff understand the nuances of winery accounting and operations is essential. Still, some accountants say LIFO may be extinct in a few years if international accounting standards, which don’t recognize it, are adopted. If you are having trouble finding the right accountant for your winery needs consider the Winery Operations Services from CoreCorp.