Inventory - ASPE 3031

Question 1

Inventory valuation (ASPE)

Answer 1

Inventory valuation (ASPE)
* Inventories shall be measured at the lower of cost and net realizable value (NRV).
* The cost of inventories shall comprise all costs of purchase, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition.
* NRV is the estimated selling price in the ordinary course of business less estimated selling costs
* Estimates of NRV are based on the most reliable evidence available, at the time the estimates are made, of the amount the inventories are expected to realize upon sale.

Reference: ASPE 3031.07, .10-12, .29

Question 2

Inventory costs (ASPE)

Answer 2

Inventory costs (ASPE)
* The cost of inventories shall comprise all purchase, conversion and other costs incurred in bringing the inventories to their present location and condition
* Trade discounts, rebates and other similar items are deducted in determining the costs of purchase
* Storage, administrative overhead, and selling costs are specifically excluded from the cost of inventories

Reference: ASPE 3031.11, .12, .17

Question 3

Inventory measurement – Cost formulas (specific identification) (ASPE)

Answer 3

• The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.

Reference: ASPE 3031.22

Question 4

Inventory measurement – Allocation of overhead (ASPE)

Answer 4

• The allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities.
• The actual level of production may be used if it approximates normal capacity.
• Unallocated overheads are recognized as an expense in the period in which they are incurred.

Reference: ASPE 3031.14