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IAS 2 INVENTORIES – NET REALIZABLE VALUE AND WRITE-OFF

28 August 2008 2,999 views No Comment

Hi: Good morning: Henk:

Would you be kind to let me know the IFRS – IAS 2 concerning to ret realizable value and write-off: 1. How to handle the declined value of inventory stocks? 2. What is the correct procedure to write-down of damaged or obsolete items?

Thanks for your assistance.

Raymond

The easy way would be that the outcome using a flat rate does not materially differ from using the (IFRS correct) effective rate. Otherwise the accounting needs to either

- keep a separate ledger to account for income using an effective rate (for example a spreadsheet) and adjust it for financial statement purposes, or

- calculate the difference between flat rate and an effective (average) rate for a period (month, quarter or year, the shorter the more real) and adjust the income amount.

Kind regards,

If an institution is recognizing income by using flat rate method, but IFRS requires to recognize by using effective rate method. My questions are:

a) policy remains but financial statements it should be based on effective rate. Is it?

asim

I don’t think so, see this link

http://en.wikipedia.org/wiki/IFRS

Hello:

Can anyone confirm if the PRC has officially transitioned to full IFRS GAAP reporting and if so, what was the effective date? Are companies mandated to report in IFRS GAAP or can they still report in PRC GAAP up to a certain point?

Thanks for any clarification any of you can provide.

Also, if you have any resources you might refer me to, that would be great.

Debbie

As per IAS 2 :

Inventory to be valued at Lower of cost or Net relizable value NRV. NRV= Selling price minus estimited cost to sell.

Any decline is to be charged to cost of good sold.

In GAAP

Inventory to be valued at Lower of cost or Net relizable value NRV

But the MArket value is the median of Rreplacement cost , Ceiling (SP-cost of completion and selling) and Floor ( cost of completion and selling and profit).

Any decline is to be charged to cost of good sold.

Shabi

b) How to convert portfolio by using effective rate.?