91 NOTES TO THE FINANCIAL STATEMENTS

Note 5. Inventory and Related Property, Net

Inventory and Related Property, Net as of September 30, 2021, and 2020

Restated

(In billions of dollars) 2021 2020

Inventory held for current sale ................................................................................................ 72.1................................ 69.6 ...........

Inventory held in reserve for future sale ................................................................................................ 0.9 .............................1.0 

Inventory and operating material and supplies held for repair ................................................................ 77.1 ...............................

57.8 

Inventory—excess, obsolete, and unserviceable ................................................................................................ 0.7 0.6 ................

Operating materials and supplies held for use ................................................................................................ 158.2 149.0....................

Operating materials and supplies held in reserve for future use ................................................................ 28.6 ...........................43.0 

Operating materials and supplies-excess, obsolete, and unserviceable ................................................................ 0.7 3.1 ................

Stockpile materials held in reserve for future use................................................................................................ 58.6 55.1 .................

Stockpile materials held for sale ................................................................................................ 7.0 ................................ 7.5 ........

Other related property ................................................................................................................................ 4.5 5.3.......................

Allowance for loss ................................................................................................................................ (9.2) (10.1) ............................

Total inventory and related property, net ................................................................................................ 399.2 381.9 ...........................

Inventory is tangible personal property that is either held for sale, in the process of production for sale, or to be

consumed in the production of goods for sale or in the provision of services for a fee. For FY 2021, a change in presentation

was identified. For FY 2021, inventory held in reserve for future sale is included as a separate amount in the table.

Inventory is categorized as one of the following:

• Held for current sale – includes items currently for sale or transfer to either entities outside the federal government,

or other federal entities.

• Held in reserve for future sale – includes items being held for sale or transfer to either entities outside the federal

government or other federal entities in the future.

• Held for repair – items that require servicing to make them suitable for sale or use. Inventory held for repair may be

treated in one of two ways: the allowance method or the direct method. Under the allowance method, inventory held

for repair is valued at the same value as a serviceable item. Under the direct method, inventory held for repair is

valued at the same value as a serviceable item less the estimated repair costs.

• Excess – stock that exceeds the demand expected in the normal course of operations because the amount on hand is

more than can be sold in the foreseeable future and that does not meet management’s criteria to be held in reserve

for future sale or use.

• Obsolete – items that are no longer needed due to changes in technology, laws, customs, or operations.

• Unserviceable – damaged items that are more economical to dispose of than to repair.

OM&S consists of tangible personal property to be consumed in normal operations and is categorized as one of the

above categories or in the additional listed category below:

• Held in reserve for future sale or use – items maintained because they are not readily available in the market or

because there is more than a remote chance that they will eventually be needed.

Stockpile materials are strategic and critical materials held due to statutory requirements for use in national defense,

conservation, or local/national emergencies. Refer to the financial statements of DOD, DOE and HHS for additional

information regarding stockpile materials.

Before selling any stockpile material, Congress must enact specific enabling legislation. When stockpile material is

authorized to be sold federal entities reclassify the material from held in reserve to held for sale and disclose as stockpile
NOTES TO THE FINANCIAL STATEMENTS 92

material held for sale. Stockpile material held for sale includes ores, metals, alloys, and medical supplies authorized for sale.

Other related property consists of the following:

• Forfeited property consists of monetary instruments, intangible property, real property, and tangible personal

property acquired through forfeiture proceedings; property acquired by the government to satisfy a tax liability; and

unclaimed and abandoned merchandise. Please refer to the financial statements of DOJ and Treasury for additional

information regarding forfeited property.

• Goods acquired under price support and stabilization programs are referred to as commodities. Commodities are

items of commerce or trade having an exchange value. Please refer to the financial statements of USDA for

additional information regarding commodities.

• Seized property includes monetary instruments, real property and tangible personal property of others in the actual

or constructive possession of the custodial entity. For additional information on seized property, refer to the

financial statements of DOJ and Treasury.

• Foreclosed property consists of any asset received in satisfaction of a loan receivable or as a result of payment of a

claim under a guaranteed or insured loan (excluding commodities acquired under price support programs). For

additional information on foreclosed property, see Note 4—Loans Receivable, Net and Loan Guarantee Liabilities.

Also refer to the financial statements of USDA, VA, and HUD for additional information regarding foreclosed

property.

DOD comprises approximately 81.9 percent of the government’s inventory and related property, net, as of September

30, 2021. DOD followed SFFAS No. 21, Reporting Corrections of Errors and Changes in Accounting Principles and

corrected FY 2020 errors identified during the standalone audits of twenty-six component entities. As a result, FY 2020

OM&S has been restated to reflect the increase of $2.2 billion reported by DOD.

The following entities are the main contributors to the government’s reported inventory and related property, net of

$399.2 billion as of September 30, 2021. Refer to each entity’s financial statements for additional information.

• DOD

• DOE

• Treasury

• HHS

• DHS