Inventories

Question 1

Recognition - 3 criteria cumulative

Answer 1

1) Transfer of risk and rewards of economic ownership
2) Ability to measure costs reliably
3) Generation of probable future economic benefits

Question 2

Measurement of Inventories

Answer 2

Either costs or net realizable value - compare both and chose lower value

Question 3

Subsequent Measurement of inventories

Answer 3

Writedown of value of an asset. Due to quantity (surplus of qty - max 90%), technical (obsolescence - max 90%), price risk (realizable value decreases or is below costs - initial measurement)

Question 4

Depletion Span

Answer 4

Inventory Level / Consumption/resale per year
Depletion Span >1year - valuation allowance needs to be corrected