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FINANCIAL ACOCUNTING AND REPORTING > INVENTORIES - IAS 2 > Flashcards

INVENTORIES - IAS 2 Flashcards

1
Q

SCOPE OF IAS 2

A
  • held for sale in the ordinary course of business; or
  • in the process of production for such sale; or
  • in the form of materials or supplies to be consumed in the production process or in the rendering of services.
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2
Q

Exceptions to the Scope of IAS 2

A

Recognition and Measurement

  1. Financial Instrument (IAS 32 AND IFRS 9)
  2. biological assets related to agricultural activity and agricultural produce at the POINT OF HARVEST (IAS 41)
  3. work in process arising under construction contracts

Measurement:

  1. certain producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products (NRV) *
  2. certain commodity brokers-dealers (FVLCTS)*

*change is recognized in P/L in the period of change.

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3
Q

Required disclosure for inventories

A
  1. Accounting policy
  2. CV of each type of inventory
  3. CV of inventories carried at FVLCTS
  4. CV of inventories pledged as security
  5. write-down recognized as expense
  6. reversal of write-down and the reason for such
  7. cost of inventories recognized as COGS
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4
Q

Shipping terms

Imagine the Ship

A

Buyer

  1. FAS
  2. CIF
  3. Shipping point (FOB SELLER),

Seller

  1. ex ship
  2. FOB Destination (FOB Buyer)
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5
Q

Identify the owner of goods:

  1. Consigned goods
  2. Sales with Repurchase Agreement
  3. Pledge of inventory
  4. loan of inventory
  5. sale or return
  6. sale on trial
  7. installment sale
  8. bill and hold (B)
  9. lay-away sale
  10. special order
A
  1. consignor
  2. seller
  3. borrower
  4. borrower
  5. buyer
  6. seller
  7. buyer
  8. buyer
  9. seller
  10. buyer upon completion
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6
Q

Initial Measurement of Inventories

A

COST + DACS

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7
Q

Subsequent Measurement of Inventories

A

LCNRV

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8
Q

Financing component in the inventories

A

The difference between normal credit terms and actual payments are recognised as interest expense over the period of financing.

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9
Q

NRV of:

  1. Finished goods
  2. Work In Process/ defective
  3. Raw materials
A
  1. Est SP - Est. Cost to sell
  2. Est SP - est Cost to complete - est cost to sell
  3. current replacement cost
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10
Q

INVENTORIES to automatic write- down

A

FG and WIP/ defective

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11
Q

Special procedure for writing down of Raw materials

A
  1. cost vs. replacement cost (lower)
  2. check if related FG is written-down
  3. if yes, proceed to writing down of RM
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12
Q

2 Accounting methods for writing down

A
  1. direct method (COGS METHOD)
  2. allowance method (LOSS METHOD)

either way, same results

GAIN ON REVERSAL is limited to previous amount of write-down

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13
Q

PURCHASE COMMITMENT

  • obligation
  • noncancelable
A

Loss on purchase commitment……………………….xxx
Est Liability on Purchase Commitment ………………xxx

GAIN ON REVERSAL is limited to previous amount of loss recognized

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14
Q

INVENTORY ESTIMATION

Physical of inventory is highighted

A
  1. GP method (interim only)
  2. Retail Method (interim and annual)
    a. Average
    b. FIFO (excludes Beg inv in cost ratio computation
    c. Conservative ( excludes Net Markdown in cost ratio computation)
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15
Q

Retail Inventory Estimation

focused formula

A

Cost Retail
TGAS……….. xx xx
EI………………. xx xx
COS / NS….. xx xx

*cost ratio changes but the template for all methods remains the same

TGAS includes Abnormal Loss deducted
COGS @ Retail is Gross Sales- SR + employee discount + normal losses

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16
Q

Evidence obtained after the end of the reporting period

that is considered ADJUSTING EVENTS after the reporting period

A

An important indicator when estimating net realisable value is the last available selling price, including selling price REALIZED after the reporting date which usually provides evidence of conditions that existed at a reporting date.

17
Q

commodity brokers and dealers who measure their inventories at fair value less costs to sell.

A

changes in fair value less costs to sell are recognised in p/l in the period of the change.

18
Q

Write down of inventory is applied in an _______ basis

A

item by item

FINANCIAL ACOCUNTING AND REPORTING (4 decks)

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