I work in the USA for a manufacturing subsidiary of a company based internationally(IFRS) and there seems to be some disagreement about the interim period reporting for our absorption accounting. We have assigned costing rates for both our labor and overhead costs. Obviously, the rates are estimates and vary some from our actuals(what's being settled). Some months our rates are too high and other months they are too low. There is an accountant at the corporate headquarters that suggests we need to 'true up' to the P&L our standard costs every month to account for the variance between the standard rate and the actual amount that was settled. For example, our standard labor cost is 55 but our average labor cost paid for the month was 53. What should we do with this delta? Park it on the balance sheet until year end or release it at the end of the month? Is there accounting guidance/literature that describes how we should handle the accounting in the interim that I can review? My thought/intuition is to park this 'variance' from month to month on the balance sheet and release the variance at the end of the fiscal year(vs releasing it to the P&L every month). Thanks, Ryan
