Medicine inventory is usually classified as “inventory” in the financial statements and is an important current asset. Under Hong Kong accounting standards, inventory should be valued at the lower of cost and net realisable value. “Cost” usually refers to your purchase cost and may be calculated using the first-in, first-out (FIFO) or weighted average cost method. “Net realisable value” is the estimated selling price less the related costs of sale. If, for reasons such as medicines nearing expiry or falling market prices, net realisable value falls below your purchase cost, you must make an inventory write-down provision and recognise the loss in the current income statement, thereby reducing your reported profit and asset value.
HONG KONG DRUG LICENSING
Medicine inventory is a significant asset. How should I value it financially, and what impact will this have on my financial statements?
A complete explanation of the regulatory basis, Drew Tang’s recommendations and risk alerts. The original material dates from 2025; read it alongside the latest official requirements.
Original guide, 2025 edition: These FAQs are provided for topic-based reference and have not all been individually checked against current rules. Please confirm fees, personnel, renewal, changes and product requirements against the professional in-depth guide for the relevant licence type and the official requirements in force at the time.
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