CERTYNEX IFRS ACADEMY

The management accountant of Textiles Brenne compares the total cost of finished goods (500,000) with their total net realisable value (520,000) and concludes that no write-down is needed. However, the winter coat line, with a cost of 80,000, has a net realisable value of 62,000; for all other items, net realisable value exceeds cost. What is the error?

No error: the total net realisable value of finished goods exceeds their total cost, which is sufficient.

The global assessment by classification is inappropriate: the coats must be written down by 18,000.

Write the coats down by 80,000, i.e. their whole cost.

The coats must be written down by 18,000, but this loss may be offset by the unrealised margin on the other items of the classification.