Sakura Minimal, a fictional fashion company, has grown to around 40 employees. Designers, management, and order reception occupy one building; manufacturing operates in another. Sewing machines, laptops, fabric, samples, and finished garments move between people and premises.
When news arrives about more flexible inventory procedures, a director forwards it to the accountant. But the accountant cannot establish alone whether a machine still works, where a sample collection went, or how much usable fabric remains.
The reform concerns how management organises that verification.
One Latvian word, several kinds of checks
In English, “inventory” often means stock: fabric, accessories, and garments. Latvian inventarizācija has a broader accounting meaning: verifying the actual position of assets and liabilities and reconciling it with the books.
For a foreign founder, three terms help:
- Krājumi: stocks, including materials, unfinished production, and finished goods.
- Pamatlīdzekļi: fixed assets, such as manufacturing equipment.
- Inventarizācija: the verification process, extending beyond a stock count.
Year-end verification remains compulsory. [1]
What changes—and where could it help?
Amendments adopted on 6 October allow more flexible methods, including photographs and video inspections. They also permit certain longer intervals between physical inspections of long-term assets and equipment where effective asset-protection controls exist. This does not extend the same interval to fabric stocks. [2]
The company can choose methods appropriate to different objects:
| Location | What to check | An illustrative approach |
|---|---|---|
| Design and administration | Laptops, monitors, furniture, sample garments | Identify equipment by asset number; confirm its user, location, and condition; classify samples correctly |
| Manufacturing | Sewing machines, cutting equipment, tools | Match equipment to records and identify damage or disuse |
| Material storage | Fabric, thread, fasteners, packaging | Count or measure; distinguish usable materials from damaged or obsolete stock |
| Production and dispatch | Unfinished and completed garments | Link quantities to orders and establish their position at the reporting date |
| Accounting records | Customer debts, supplier liabilities, cash, bank balances | Check supporting records and reconcile relevant balances |
These are practical examples, not prescribed methods for every company. The accountant helps determine how items are classified and valued.
A photograph may identify a sewing machine. It cannot reliably establish the length of fabric remaining inside every roll.
Who does what?
Management remains responsible for organising accounting and inventory verification. Delegating tasks to employees or an external accountant does not remove that responsibility. [1]
A workable arrangement might be:
- The office administrator coordinates office equipment and samples.
- A manufacturing administrator coordinates equipment and materials.
- Another suitable employee checks significant quantities or discrepancies.
- The accountant reconciles findings with the records.
- A designated director reviews exceptions and approves corrective action.
Management can organise inventory commissions by location or asset type. The amended rules require notification of the sworn auditor where the annual accounts undergo the relevant audit. [2]
For a growing company, the useful question is: who supplies the evidence, who checks it, and who decides what happens when it is wrong?
Internal control: everyday arrangements that work
Here, internal control means the company’s own arrangements for protecting assets and maintaining reliable information. For our fashion company, these could include:
- Recording who holds each laptop and when it changes hands.
- Recording fabric issued to production against an order.
- Documenting transfers of samples between premises.
- Separately recording damaged materials and proposed disposals.
- Requiring a second person to review stock adjustments.
- Keeping verification evidence in accessible company records.
These examples are not a universal legal checklist. Their adequacy depends on the company’s risks and whether they actually work. The regulations describe controls such as separating duties and protecting accounting data. Accounting organisation documents must be prepared in Latvian; an English explanation can help foreign managers understand the approved procedures. [3]
A policy that staff never follow provides little practical assurance.
Where do the results go?
Normally, findings go to management or its designated reviewer, then into accounting reconciliation and retained company records. There is no new general requirement to upload every asset list to VID. Specific duties remain: discrepancies with VID’s tax-balance data must be reported through EDS. [3]
Why should a director care about the accounting effect?
Suppose the books show 500 metres of fabric, but verification finds 420. The company needs to investigate: unrecorded production use, a measurement error, damage, or loss may explain the difference.
If the fabric was used for customer orders without being recorded, the company may have unreliable job-cost information. If it deteriorated in storage, management needs to understand the cause and the accountant needs to assess its treatment.
If a laptop simply moved between buildings, correcting the location record may be sufficient. That is not automatically a financial loss.
Verified differences are reflected in accounting under the company’s procedures. Year-end findings must reach the relevant year’s financial statements. [2]
The management decision
The company can retain its existing approach or adopt the new flexibility; no particular new technology is compulsory. [4] Before changing methods, management should agree with the accountant which checks can be simplified, what evidence will support them, and who owns each task.
The benefit is a verification process that fits the business—and records that management can trust.