If the net realisable value of inventory later increases, an earlier write-down under IAS 2 may be:
Correct answer: B. Reversed only up to the original cost
- A. Reversed without any upper limit
- B. Reversed only up to the original cost
- C. Transferred permanently to share capital
- D. Ignored until the inventory is sold
Explanation
IAS 2 permits reversal when the circumstances causing the write-down no longer exist. The reversal cannot increase inventory above the cost that would have been reported without the earlier write-down.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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More Inventory Valuation questions
When inventory is written down to net realisable value, the resulting loss is generally recognized as:
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Which statement best describes the weighted average cost method when identical inventory units are purchased at different prices?
A retailer has 80 units costing Rs. 15 each and buys 120 more units at Rs. 20 each. Under a periodic weighted average method, the cost per unit is:
Which cost is included in inventory when it is directly attributable to bringing the goods to their present condition?