IAS 2 · Case studies (Step 3 of 5)
Practical case
Tervalis Paints SAS, a fictitious manufacturer of building paints (165 employees, single plant in Montbrézy), IFRS financial statements, year end 31 December, amounts in euros.
L1 · Guided · Year N (identifying inventories, buying the pigment)
Tervalis Paints buys materials (white titanium dioxide pigment, resins, empty buckets), manufactures paints packed in buckets and tins, and resells, in its factory shop, rollers and brushes bought from outside suppliers. You follow its inventories over three years: definition, costs of purchase and production costs in N, cost formulas and net realisable value at the N+1 year end, then the reversal of a write-down, the amount of inventories recognised as an expense and the note in N+2. All figures are case data; teaching assumptions and professional judgements are flagged as such. Teaching assumption: unit costs are stated to the cent and amounts to the euro; no rate or numeric threshold quoted in the case is a requirement of the standard.
Standard involved: IAS 2 Inventories (scope, definitions, measurement principle, costs of purchase). Before calculating a cost, you must know what inventory is. Read the two documents, then answer the questions in order: each one prepares the next.
Fundamental level: the method, help and references are shown.
Method
File checklist
2 / 6 stages reached
Context · Dated fact of the file
Tervalis Paints SAS, a fictitious manufacturer of building paints (165 employees, single plant in Montbrézy), IFRS financial statements, year end 31 December, amounts in euros.
Initial event · L1·Year N (identifying inventories, buying the pigment) · Current stage
Standard involved: IAS 2 Inventories (scope, definitions, measurement principle, costs of purchase). Before calculating a cost, you must know what inventory is. Read the two documents, then answer the questions in order: each one prepares the next.
Pieces added
New period · L2·Year N (production and year end) · Upcoming: unlocks after the current stage
New period · L3·Year N+1 · Upcoming: unlocks after the current stage
New period · L4·Year N+2 · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
2 documents to work from at this level.
Document 1Supporting document
| Item | Description |
|---|---|
| White pigment | 18 tonnes in a silo, to be incorporated into the paints |
| Empty buckets and labels | packaging bought, filled on the packing line |
| Mixing tanks in progress | Façadis paint being dispersed, not yet packed |
| Façadis 15 L buckets | finished paint, packed, ready to be delivered to distributors |
| Rollers and brushes | bought from an outside supplier and resold unchanged in the factory shop |
| Industrial disperser No. 4 | production line machine, used for three years |
| Forward exchange contracts | forward purchases of dollars entered into to pay for the next imported pigment lots |
First level: all the data is in the brief and the pieces of this level.
4 parts to answer, marked when you submit the level.
Find the useful facts in the pieces before concluding.
Part 1 · Classification · Recognition
Classify each item in document 1: category of inventories under IAS 2, or item that is not inventory.
White pigment in the silo
Empty buckets and labels
Façadis paint tanks being dispersed
Packed Façadis 15 L buckets
Rollers and brushes in the factory shop
Industrial disperser No. 4
Forward exchange contracts on the dollar
3 more questions will appear once the current question is complete.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Answer every part to submit the level and see the conclusion.
Normative references