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32
Wiley IFRS: Practical Implementation Guide and Workbook
Required
Compute the valuation of the inventory of Moonstruck Enterprises at December 31, 200X, under lAS 2
using the "lower of cost and NRV" principle.
Solu tion
Product line
Sofas
Dining tables
Beds
Closets
Lounge chairs
Quantity
on hand
100
200
300
400
500
Cost
per unit
($)
1,000
500
1,500
750
250
Inventory
at cost
($)
100,000
100,000
450,000
300,000
125 000
$1075 000
NRV
per unit
($)
1,020
450
1,600
770
200
Lower of cost
and
NRV($)
100,000
90,000
450,000
300,000
100000
$1040 000
9.
RECOGNITION OF EXPENSE
Whe n inventory is so ld, the carrying amount of inventory sho uld be recognized as an expense
whe n the related revenue is recognized. Moreover, the amo unt of any inventory written down to net
realizable va lue is recogn ized as an expense . The amount of any reversa l of wri te-down of
inventory should be a red uction to the amo unt wri tten off in the pe riod it was reversed.
10.
DISCLOSURE
The fin ancial statements should disclose
• Accounting policies adopted for measu ring inventories and the cos t flow assumption (i.e.,
cost formula) used
• Total carrying amoun t as well as amounts classified as appropriate to the en tity
• Carrying amount of any inve ntories carried at fai r va lue less costs to se ll
• Amount of inventory recognized as expense du ring the period
• Amount of any write-down of inventories recogn ized as an expense in the period
• Amount of any reversa l of a wri te-down to net realizable va lue and the circumstances that led
to such reversal
• Circumstances requi ring a reversal of the wri te-down
• Carrying amount of inventories pledged as security for liabilities
11,
EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS
11.1
LECTRA, Annual Report
2006
Not es to Financial Statements
Accounting Policies
In ventories
Inventories of raw materials are valued at the lower of purchase cost (based on weighted-average
cost, including related costs) and their net realizable value. Finished goods and works in progress are
valued at the lower of standard industrial cost (adjusted at year-end on an actual cost basis) and their
net realizable value. Cost price does not include interest expense.
A write-down is recorded if net realizable value is less than the book value.
Write-downs on inventories of spare parts and consumables are calculated by comparing book
value and probable net realizable value after a specific analysis of the rotation and obsolescence of in–
ventory items, taking into account the utilization of items for maintenance and after-sales services ac–
tivities, and changes in the range of products marketed.
11.2
BASF, An nual Report
2006
Notes to the Financial Statements
14.
Inventories
(In euras millions)
Raw
materials and factory supplies
Work-in -process finished goods and merchandise
Advance payments and services-in-process
2006
1,656.0
4,962.0
54.4
6672 4
2005
121 3.8
4,148.5
67.9
54302