Chapter 12 - Inventories and IAS 10 Events after the reporting period

Question 1

What are inventories?

Answer 1

They are assets that are:
held for sale in the ordinary course of business (finished goods)
in the process of production (work in progress)
materials that will be used in the production process (raw materials)

Question 2

What must inventories be valued at?

Answer 2

Lower of cost or net realisable value

Question 3

What is the cost of inventory?

Answer 3

Cost of purchase, costs of conversion and costs to bring inventory to present location and condition

Question 4

What is the net realisable value of inventory?

Answer 4

Estimated selling price, less cost to completion and costs to sell

Question 5

What is an event after the reporting period defined as?

Answer 5

A material event occurring between the reporting date and the date on which the financial statements are authorised for issue

Question 6

What are some examples of adjusting events?

Answer 6

Discovery of errors or fraud
Adjustment to valuations of inventory
Major customers going into liquidation
Completion of an insurance claim
Completion of a court case

Question 7

What are some non-adjusting events?

Answer 7

Fluctuations in tax/exchange rates
Issue of shares
Acquisition/disposal/merger of business
Fires or floods
Plans for restructuring
Equity dividends declared after the reporting period

Question 8

What should we disclose about a non-adjusting event at the end of the reporting period?

Answer 8

The nature of the event
An estimate of the financial effect
The date the directors approve the financial statements