Inventory, EAEOAP & Provision

Question 1

IAS 2 - valuation, methods, changes in valuation

Answer 1

Stock is valued at lower of cost and net realisable value

methods of arriving at cost
1. actual unit cost for bespoke items
2.FIFO
3. WACC

Changes in valuation methods is a change in accounting policy and should be accounted for retrospectively

Question 2

IAS 10 - Post balance sheet events - Types, actions

Answer 2

Post balance sheet period is period between end of accounting period and auditor signoff

Types
1. Adjusting - These are clarifying and providing evidence of
conditions that existed at year end. Final accounts are changed
2. No adjusting - All other events., they do not concern year end
accounts, if significant add to notes on the account

Question 3

IAS 37 - Provisions, contingent assets and liabilities
Provisions - conditions
contingent liabilities

Answer 3

Provisions is a liability of uncertain timing or amount, in order to recognise ALL three conditions must be present at reporting date

1. Present obligation (legal or constructive) has risen as a result of
   past events.
2. payment is probable
3. the amount can be reliably estimated.

Recognise liability in full or not at all, recognise for onerous contract, do not recognise for future events

contingent liabilities - This is a possible obligation or the amount cannot be reliably estimated.
There needs to be a DISCLOSURE in the accounts

contingent assets - This is a possible asset from past event whose existence will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly in the control of the entity.

It would only be recognised if it was virtually certain