Net realisable value test, write-down and reversal

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Fulfilment of firm sales contracts

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  270,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  255,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  3,000

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  252,000

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  252,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  18,000

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  18,000

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Account	Debit	Credit
  Inventory write-down expense	18,000
  Inventories		18,000

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Write-down to net realisable value

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedPass
• The reversal entry is balancedNot evaluated

Assets

-18,000

Liabilities

0

Profit or loss

-18,000

OCI

0

Equity

-18,000

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  90,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  120,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  6,000

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  114,000

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  90,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  0

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Net realisable value at least equal to cost: no write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  200,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  195,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  5,000

• Previous write-down still recognised on the item (0 if none)

  Number

  30,000

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  190,000

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  190,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  10,000

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  20,000

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  20,000

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Account	Debit	Credit
  Inventories	20,000
  Inventory write-down expense (reversal)		20,000

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Reversal of a previous write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedPass

Assets

20,000

Liabilities

0

Profit or loss

20,000

OCI

0

Equity

20,000

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  6,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  5,000

• Estimated costs of completion

  Number

  1,000

• Estimated costs necessary to make the sale

  Number

  500

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  3,500

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  3,500

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  2,500

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  2,500

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Account	Debit	Credit
  Inventory write-down expense	2,500
  Inventories		2,500

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Write-down to net realisable value

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedPass
• The reversal entry is balancedNot evaluated

Assets

-2,500

Liabilities

0

Profit or loss

-2,500

OCI

0

Equity

-2,500

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Fulfilment of firm sales contracts

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  36,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  33,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  1,500

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  31,500

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  31,500

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  4,500

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  4,500

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Account	Debit	Credit
  Inventory write-down expense	4,500
  Inventories		4,500

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Write-down to net realisable value

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedPass
• The reversal entry is balancedNot evaluated

Assets

-4,500

Liabilities

0

Profit or loss

-4,500

OCI

0

Equity

-4,500

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  88,800

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  155,400

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  7,400

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  148,000

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  88,800

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  0

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Net realisable value at least equal to cost: no write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  9,840

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  10,200

• Estimated costs of completion

  Number

  1,800

• Estimated costs necessary to make the sale

  Number

  600

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  7,800

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  7,800

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  2,040

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  2,040

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Account	Debit	Credit
  Inventory write-down expense	2,040
  Inventories		2,040

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Write-down to net realisable value

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedPass
• The reversal entry is balancedNot evaluated

Assets

-2,040

Liabilities

0

Profit or loss

-2,040

OCI

0

Equity

-2,040

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  164,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  280,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  12,000

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  268,000

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  164,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  0

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Net realisable value at least equal to cost: no write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  72,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  85,500

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  2,700

• Previous write-down still recognised on the item (0 if none)

  Number

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  82,800

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  72,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  0

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  0

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Debit Inventories ← Reversal for the period (capped at the previous write-down) ; Credit Inventory write-down expense (reversal) ← Reversal for the period (capped at the previous write-down)

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Net realisable value at least equal to cost: no write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedNot evaluated

Assets

0

Liabilities

0

Profit or loss

0

OCI

0

Equity

0

• Item tested or group of similar items (description, quantity, condition)

  TextRequired

  One instance per item, or per group of similar or related items where grouping is appropriate (para. 29). For a quantity held under firm contracts and an excess, use two instances (para. 31).

• Purpose for which the inventory is held

  ChoiceRequired

  Sale at general selling prices

  Sale at general selling prices / Fulfilment of firm sales contracts / Materials and supplies held for use in production

• Cost of the item or group

  NumberRequired

  40,000

• Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts)

  NumberRequired

  48,000

• Estimated costs of completion

  Number

• Estimated costs necessary to make the sale

  Number

  1,500

• Previous write-down still recognised on the item (0 if none)

  Number

  12,000

• Events after the end of the period affecting prices or costs

  Text

• Materials: expected selling price of the finished products compared with their cost, replacement cost of the materials

  Text

  If the finished products are expected to be sold at or above cost, enter as estimated price an amount at least equal to the cost of the material: no write-down (para. 32). Otherwise, replacement cost may serve as the measure of net realisable value.

• Evidence obtained and referenced (category, document reference)

  EvidenceRequired

IAS 2 §9IAS 2 §28IAS 2 §29IAS 2 §30

• Matters examined

  ChecklistRequired

  • Measurement at the lower of cost and net realisable value
  • Indicators that cost may not be recoverable: damage, whole or partial obsolescence, decline in selling prices, increase in estimated costs of completion or sale
  • Write-down assessed item by item
  • Grouping limited to similar or related items of the same product line that cannot practicably be evaluated separately
  • No write-down on the basis of a classification of inventory or of all the inventories of an operating segment
  • Estimate based on the most reliable evidence available at the time the estimate is made
  • Changes after the end of the period taken into account to the extent they confirm conditions existing at the end of the period

  Grouping items is a documented judgement of the entity within the limits of paragraph 29; it is never imposed by the standard.

IAS 2 §31IAS 2 §32

• Specific situations examined

  Checklist

  • Estimate taking into consideration the purpose for which the inventory is held
  • Quantity held to satisfy firm contracts: value based on the contract price
  • Quantity in excess of the contracts: general selling prices
  • Provisions on firm sales contracts in excess of inventory quantities or on firm purchase contracts: IAS 37
  • Materials not written down below cost if the finished products are expected to be sold at or above cost
  • Otherwise, materials written down; replacement cost may be the best available measure

IAS 2 §33

• Conditions for the reversal

  Checklist

  • Net realisable value assessed again in each period
  • Circumstances of the write-down no longer exist, or clear evidence of an increase because of changed economic circumstances
  • Reversal limited to the amount of the original write-down
  • New carrying amount is the lower of the cost and the revised net realisable value

IAS 2 §9IAS 2 §33

• Net realisable value (estimated price − costs of completion − costs to sell)

  CalculationRequired

  46,500

  Estimated selling price in the ordinary course of business (contract price for the quantity under firm contracts) ; − Estimated costs of completion ; − Estimated costs necessary to make the sale

• Closing carrying amount (lower of cost and net realisable value)

  CalculationRequired

  40,000

  Cost of the item or group ; Net realisable value (estimated price − costs of completion − costs to sell)

• Write-down required at the end of the period (cost − net realisable value, if positive)

  CalculationRequired

  0

  Cost of the item or group ; − Net realisable value (estimated price − costs of completion − costs to sell)

• Additional write-down for the period (write-down required − previous write-down, if positive)

  CalculationRequired

  0

  Write-down required at the end of the period (cost − net realisable value, if positive) ; − Previous write-down still recognised on the item (0 if none)

• Decrease in the write-down required (previous write-down − write-down required, if positive)

  Calculation

  12,000

  Previous write-down still recognised on the item (0 if none) ; − Write-down required at the end of the period (cost − net realisable value, if positive)

• Reversal for the period (capped at the previous write-down)

  Calculation

  12,000

  Previous write-down still recognised on the item (0 if none) ; Decrease in the write-down required (previous write-down − write-down required, if positive)

  The reversal brings the carrying amount back to the lower of cost and the revised net realisable value, without exceeding the original write-down (para. 33). It is recognised only if the increase is clearly evidenced: document this in the reversal section.

• Write-down of inventories

  EntryRequired

  Debit Inventory write-down expense ← Additional write-down for the period (write-down required − previous write-down, if positive) ; Credit Inventories ← Additional write-down for the period (write-down required − previous write-down, if positive)

• Reversal of write-down

  EntryRequired

  Account	Debit	Credit
  Inventories	12,000
  Inventory write-down expense (reversal)		12,000

IAS 2 §29IAS 2 §30IAS 2 §31IAS 2 §32IAS 2 §33

• Outcome of the test

  JudgmentRequired

  Reversal of a previous write-down

  Net realisable value at least equal to cost: no write-down / Write-down to net realisable value / Reversal of a previous write-down / Materials not written down: finished products sold at or above cost

• Rationale: facts relied on, analysis, alternative rejected

  TextRequired

• Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

  TableRequired

IAS 2 §33

• Items passed to the notes workpaper (“Inventories note”)

  ChecklistRequired

  • Amount of the write-down for the period
  • Amount of the reversal for the period
  • Circumstances or change in economic circumstances that led to the reversal
  • Closing carrying amount of the item or group

• Paragraphs cited in this workpaper (verification status shown from the register)

  References

• The outcome of the test is documentedPass
• The closing carrying amount is determinedPass
• Cost equals the closing carrying amount plus the write-down requiredPass
• The write-down entry is balancedNot evaluated
• The reversal entry is balancedPass

Assets

12,000

Liabilities

0

Profit or loss

12,000

OCI

0

Equity

12,000