Inventory

Question 1

Inventory is measured at:

Answer 1

Lower of Cost and Net Realizable Value

Question 2

IFRS Section for Inventory

Answer 2

IAS23

Question 3

ASPE Section for Inventory

Answer 3

ASPE3031

Question 4

Difference btw IFRS and ASPE in terms of inventory

Answer 4

Aspe allows a choice to either capitalize or expense it.
IFRS requires capitalization of borrowing costs

Question 5

Inventory defined?

Answer 5

-held for sale in ordinary course of business
-in the process of production for such sale
-material or supplies to be used in production

Question 6

Gross Profit Formula?

Answer 6

SALES - COGS = GP

Question 7

Gross Margin formula?

Answer 7

GP/Sales

Question 8

Markup % formula?

Answer 8

(SP-Cost)/Cost

Question 9

Gross Margin formula?

Answer 9

SP-Cost/SP

Question 10

Initial Measurement of Inventory in IFRS which section?

Answer 10

IAS2

Question 11

IAS2 Inventory stipulates?

Answer 11

Cost of inventory includes:
-DM
-DL
-Overhead costs
Less:
-Vendor rebates
-Discounts
-Subsidies

Question 12

Inventory Writedown?

Answer 12

When inventory is written down to its NRV, an entity will record an inventory impairment. The
impairment amount is generally debited to COGS. This approach to the writedown of inventory is
referred to as the direct method, with the charge for the writedown going directly to COGS and
inventory being reduced directly.

Question 13

Reversal of Inventory write down?

Answer 13

In this situation, the entity records an increase in the value of inventory up to the amount that
inventory was originally written down. The increase cannot exceed this amount, as inventory still
needs to be recorded at the lower of cost and NRV. The reversal of the inventory writedowns will
be shown as a reduction in expenses (generally, as a reduction in COGS).

Question 14

IFRS Section for Inventory Errors?

Answer 14

IAS8

Question 15

Inventory disclosures governed by IAS1 and IAS2

Answer 15

the accounting policies adopted in measuring inventory, including the cost formula used (specific
identification, FIFO, weighted average)
•
the carrying amount of inventory segregated into appropriate categories (such as finished goods,
work-in-progress, and raw materials)
•
the carrying amount of inventories at fair value less costs to sell
•
the amount of inventories recognized as an expense in the period (COGS)
•
the amount of any writedown of inventories recognized as an expense in the period
•
the amount of any reversal of any writedown and the circumstances or events leading to the
reversal of the writedown
•
the carrying amount of inventory pledged as security for liabilities