Question

Select one of the following topics: inventories, PPE, developmental costs, impairment losses etc.)
Tell us how you would handle the accounting system if you were choosing which methodology to use. T
Tell us the reasoning you used to support your position and what standards you use.
Use the Internet address www.ifrs.org to access the site. Use 'search this site' at the top of the page to search for the IAS you need to consult.

note: Could you please don't use your handwriting to answer this question to be easy for me to solve

Answer 1

INVENTORIES:

Inventories are covered under IAS 2, Inventories issued under IFRS.

As the Inventories are to be accounted at lower of Cost or Net Realisable Value as per requirement of IAS 2, thus:

We would first take into account all the costs that have been incurred i.e.

• Cost of Goods Bought
• Expenses incurred to bring the Goods to their present Condition

1. e.g. with respect to goods bought any transportation costs incurred along with other expenses to bring them to the buyer's intended location shall be added
2. and, for measurement of the finished goods the cost of conversion shall be added (i.e. Direct Labour and Production Overheads) and any other costs incurred to bring them to their present location and condition shall be added.

• The inventories thus measured on cost basis shall be compared to their Net Realisable Value (NRV), i.e.estimated selling price in the ordinary course of business (less) the estimated costs of completion and the estimated costs necessary to make the sale
• And thus would be measured at lower of Cost or NRV
• The carrying amount of these inventories is recognised as an expense on the basis of Matching concept i.e. in comparison to the Revenue recognised
• And any write down to NRV is recognised as and expense/loss in the same period