CERTYNEX IFRS ACADEMY

Velorance is closing its 20X2 financial year. Data: inventories measured using the first-in, first-out (FIFO) formula; total carrying amount €640,000 (materials €210,000, work in progress €130,000, finished goods €300,000); amount of inventories recognised as an expense €2,900,000; write-downs for the year €25,000; reversal of €8,000 following the end of a temporary price war; inventories of €150,000 pledged as security for a bank loan; no inventories are carried at fair value less costs to sell. Four draft notes are proposed. Which one meets the requirements of IAS 2?

Draft 1, which presents all the required amounts but does not describe the event that led to the reversal.

Draft 2, which describes the policy, the breakdown, the expense, the write-down, the reversal and its cause, but omits the pledged inventories.

Draft 3, which presents the FIFO policy, the breakdown by classification, the expense for the year, the write-down, the reversal and its cause, and the pledged inventories.

Draft 4, identical to draft 3, except that it replaces the description of the cost formula with a mere statement of the replacement cost of inventories at the year-end, deemed more meaningful to readers.