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HMRC internal manual

Business Income Manual

DVD and blu-ray disc traders: valuation basis

The valuation basis (see BIM46970) may be used if the facts show that a DVD/blu-ray disc etc has a useful economic life of two years or less.

The useful economic life is not necessarily the same as the physical life of the item. Useful economic life depends on the demand for and popularity of the item and typically will be less than the physical life of the item. While it is likely that the large majority of DVDs/blu-ray discs etc will have a useful economic life of less than two years, the trader should be able to provide facts or evidence to support a claim that such is the case.

Normally it can be accepted that the trader using the valuation basis can write down on a straight line basis the difference between the cost of a tape and the anticipated proceeds when it is likely to be sold.

The facts of the particular case may show that an alternative method of write down is appropriate as below.


A trader buys a batch of newly released ’AAA blockbuster’ blu-ray discs on the first day of a 12 month accounting period. The anticipated economic useful life of the items is just under two years. The blu-ray discs are to be disposed of after two years by being scrapped or sold.

The trader’s records may show that, perhaps, 75% of the rentals arise in the first 12 months after acquisition with 24% in the next six months and only 1% arising thereafter. In such a case it may be accepted that at the end of the first year the `AAA blockbuster’ blu-ray discs may be valued at 25% of the cost less the ultimate sale proceeds or scrap value it is estimated will be received. At the end of the second period the blu-ray discs would be valued at the estimated disposal proceeds.

Watch out for write downs which do not match the accounting treatment

Claims should be critically examined to identify cases for write downs which would result in the tapes being written off at an earlier point than that used in the accounts, see BIM34010 onwards.