Chapter 12 - IAS 2 inventories and IAS 10 post reporting events Flashcards
What costs should not be included in inventory?
- Abnormal amounts of wasted material
- Storage costs
- Admin costs that don’t contribute to transport
- Selling and distro costs
What are the main disclosure requirements of IAS 2?
- Accounting policy used
- Total carrying amount
- Amount of inventories carried at NRV
- Amount of inventories recognised as expense
- Details of circumstances resulting in write downs
How does IAS 10 define an event after the end of a reporting period?
Events that occur between the end of reporting and the date financial statements are authorised for issue
What are the 2 main types of events after the reporting period?
Adjusting and non-adjusting
What are adjusting events?
Events which provide evidence of conditions that existed at the reporting date
Should FS be adjusted to reflect the adjusting event?
Yes
What are non-adjusting events?
Events that are indicative to conditions that arose after the reporting date
Should FS be adjusted to reflect non-adjusting events?
No
Should however be disclosed if they affect understanding of FS
What are some examples of adjusting events?
- Selling inventory post year end for lower than cost price
- Insolvency of a major customer
- Discovery of fraud
- NRV of inventories
- Resolution of court case
What are some examples of non-adjusting events?
- Acquisition/disposal of a subsidiary after year-end
- Decline in market value of investment
- Loss on non-current assets due to disaster
- Discontinuing of operations
How should non-adjusting events be disclosed?
By note, and should include:
- Nature of event
- Estimate of financial effect
- Date directors approve FS
What is the correct accounting treatment for dividends?
Disclose
How should an error in relation to a year-end inventory count be handled?
Adjust accounts for the error
