Scope of IAS 2 and classification of inventories: Harvested apples

Context

Pomarelle SA (a fictitious company) runs apple orchards, presses its own apples and apples bought from growers to make juice and compote, and distributes imported dried fruit (apricots, figs) to delicatessens. It reports at 31 December and applies IFRS. You are in charge of the inventory closing file at 31 December 20X6: classification of the items, cost of purchase and production cost, joint production, cost formulas, net realisable value test, write-downs and reversal, entries, impact, amount recognised as an expense, note, responses to the reviewer's notes and conclusion. Under the entity's policies (file data), the cost of dried fruit is assigned using first-in, first-out (FIFO) and that of juice and compote using the weighted average cost calculated over the year; a periodic inventory system is used, the cost of sales being determined at the reporting date; production costs are recorded by nature, materials consumed being released from inventories at their cost. The measurement of the harvest under IAS 41, the classification of the forward exchange contracts under IFRS 9, the accounting for the pressing line under IAS 16 and the treatment of events after the reporting period under IAS 10 are file data; tax is out of scope. The entries of the file are presented as not yet recorded (teaching assumption).

Assignment

Scope and classification of inventories workpaper (orchards, harvest, forward contracts, merchandise, products, supplies, components).

Purpose of the workpaper

Classify the items examined against the definition of inventories, apply the scope exclusions and the exclusions from the measurement requirements only, then set the measurement basis of each item.

Questions of the file covered by this workpaper

• Analyse the file: which accounting issues arise, which documents are useful and which information is missing?
• Classify each item with regard to the scope of IAS 2 and determine the amount at which the harvest enters inventories.

• MemoPlanning memo of the fileOpen
• MemoMemo from the orchard managerOpen
• ContractForward exchange contractsOpen
• InvoiceInvoice for the dried apricot lotOpen
• DocumentCustoms declaration and forwarder invoiceOpen
• ScheduleCosts proposed for capitalisation by the purchasing departmentOpen
• Schedule20X6 pressing campaign tableOpen
• MemoMemo from the production directorOpen
• MemoSales department memo on the campaign outputOpen
• ExtractStock cards and 20X6 sales registerOpen
• MemoMemo from the finance director: closing proposalsOpen
• ScheduleSelling price and cost data at 31 December 20X6Open
• ContractDistrimax firm sales contractOpen
• InvoiceQuotation from the relabelling subcontractorOpen
• MemoPost-closing memo from the purchasing departmentOpen
• ScheduleCount of the dried figs and the packagingOpen
• MemoMemo from the maintenance departmentOpen
• ScheduleInventory and 20X6 purchases trial balanceOpen
• ContractBank credit facility agreementOpen
• ScheduleDraft note on inventoriesOpen
• DocumentValuation report on the orchard landOpen
• ContractFactory insurance policyOpen