Under IAS 2, inventory is generally tested for a write-down to net realisable value on which basis?
Correct answer: B. Each individual item or similar group
- A. The entire business as one group
- B. Each individual item or similar group
- C. Only items purchased during the year
- D. Only finished goods held for sale
Explanation
IAS 2 generally compares cost with net realisable value for individual inventory items or suitable groups of similar items. Aggregating all inventory may hide losses on particular items and is therefore not the normal approach.
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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
A business has opening inventory of Rs. 30,000, purchases of Rs. 90,000 and closing inventory of Rs. 25,000. What is the cost of goods sold?
Which item is classified as a conversion cost of inventory?
When an earlier inventory write-down is reversed under IAS 2, the inventory's revised carrying amount cannot exceed:
When inventory is sold, its carrying amount is generally recognized as an expense in which period?
Which cost is normally excluded from inventory cost because it does not bring inventory to its present location and condition?