Annual accounts for a manufacturer (Dutch): production cost and inventory

The short answer

A manufacturer's inventory has three stages: raw materials and consumables, work in progress and finished goods. You value products you make yourself at production cost: materials and direct costs, optionally with a reasonable share of indirect costs (art. 2:388(2) DCC). If the net realisable value at the balance sheet date is lower, you write the inventory down. The cost of idle capacity does not belong in inventory.

Updated 30 October 2026

Key facts

What belongs in production cost?

The production cost comprises the purchase cost of the raw materials and consumables used and the other costs directly attributable to production. On top of that you may include a reasonable share of indirect costs, and interest on debt for the production period (art. 2:388(2) DCC).

Normal capacity: idle capacity is not inventory

You allocate fixed indirect production costs on the basis of normal capacity: the output you achieve on average over a number of periods under normal circumstances, allowing for planned maintenance. If output is lower, the amount per unit does not rise; what is not allocated as a result is an expense of the period. In case of abnormally high output, the allocation per unit decreases instead (RJ 220, paragraph 307).

Worked example: a batch of 1,000 components

A fictitious metalworker makes 1,000 components. Normal capacity is 1,200 units; fixed indirect production costs are € 12.000 per year.

On 31 December 200 components remain: 200 × € 50 = € 10.000. For 40 units the specifications are outdated; they are expected to sell for € 35 each. The write-down is 40 × (€ 50 − € 35) = € 600, so finished goods inventory comes to € 9.400. The € 2.000 and the € 600 reduce the result of this financial year.

Work in progress or contract work in progress?

Semi-finished goods from a series you make at your own risk are work in progress within inventories: you value the costs incurred and recognise profit only on delivery. If you build a machine to the order of a single customer, it is a contract in progress. RJ 221 applies to that: revenue and costs in proportion to progress, an expected loss immediately, and a separate balance sheet item outside inventories (RJ 221, paragraphs 301 and 407).

Counting, cost formulas and write-downs

Count raw materials, semi-finished goods and finished goods on or around the balance sheet date; the steps are described under valuing inventory. For similar inventories you choose one rule: weighted average prices, FIFO, LIFO or a similar method (art. 2:385(2) DCC). Damaged, obsolete or slow-moving inventory and products whose selling price has fallen are written down per item to net realisable value (art. 2:387(2) DCC; RJ 220, paragraph 323).

A large entity shows the increase or decrease in finished goods and work in progress as a separate line in the by-nature format (art. 2:377(3) DCC, under b). Small and medium-sized entities may let that item be absorbed into gross operating result (art. 2:396(4) DCC, art. 2:397(3) DCC); it does not appear in the abridged profit and loss account of a micro entity (art. 2:395a(5) DCC).

Where manufacturers go wrong

• Setting raw material consumption equal to the year's purchases, without opening and closing inventory.
• Spreading all overhead, including sales and administration, over the inventory.
• Raising the fixed-cost surcharge in a year with few orders.

Size class and tax-based valuation principles

The size of the company determines the size class, not the fact that you manufacture: check it with the size criteria and test with the audit requirement check whether an audit by an accountant is mandatory. A small entity may also value inventory according to the tax principles, provided it applies all tax principles and discloses this in the notes (art. 2:396(6) DCC).

What BVs in this sector file

Manufacturers fall under SBI section C, manufacturing (SBI 10–33), from food products to machinery. Repair and installation of machinery (SBI 33) is included as well.

In the small balance sheet class, section C had a median solvency of 49,9% for financial year 2024, lower than the 73,4% of all balance sheets in that class combined; the median current ratio was 1,89, lower than nationally (3,28). The national figure is high because of the many holding companies.

The balance sheet class follows only the balance sheet total, not the statutory size class. The dataset does not state the legal form; it covers all XBRL filings with this SBI section, mostly by BVs. Source: KVK Business Register Open Dataset Annual Accounts, processed by Jaarrekening.io, CC BY 4.0. Data downloaded and processed on 2 November 2026. Explanation and all sectors: solvency per sector and current ratio per sector.

What Jaarrekening.io does with your cost price

Nothing: you do the costing and stock count in your own bookkeeping or ERP system. After that you import the trial balance as an XAF audit file or as an Excel or CSV file. The AI suggests under which annual accounts line item each ledger account falls and writes draft notes, which you check yourself.

Sources

• Art. 2:369 DCC: inventories
• Art. 2:377 DCC: profit and loss account
• Art. 2:385 DCC: order of cost formulas
• Art. 2:387 DCC: impairments
• Art. 2:388 DCC: acquisition and production cost
• Art. 2:395a DCC: micro entity
• Art. 2:396 DCC: small entity
• Art. 2:397 DCC: medium-sized entity
• RJ Publication 2017-4: draft guideline 220 Inventories
• RJ Publication 2020-15: Guideline 221 Construction contracts
• Decree on current value (Besluit actuele waarde)

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