CERTYNEX IFRS ACADEMY

Ferlune manufactures cast-iron radiators. At the year-end, the market price of the pig iron it holds in inventory has fallen. Select the correct statements on the measurement of this inventory of materials.

Any fall in the price of pig iron requires the pig iron inventory to be reduced to its replacement cost.

The pig iron stays at cost as long as the radiators made from it are expected to sell for at least their cost.

If the price of pig iron rises above its cost, the pig iron inventory may be carried at that higher price.

If the fall in the price of pig iron indicates that the cost of the radiators will exceed their net realisable value, the pig iron is written down.

In that latter case, the replacement cost of the pig iron may be the best available measure of its net realisable value.