• paul of Others

    1. Inventories should be measured at the lower of cost, and net realizable value[1] (NRV)

    2. Cost includes all costs to bring the inventories to their present condition and location.

    3. If specific cost is not determinable, the benchmark treatment is to use either the first in, first out (FIFO) or weighted average cost formulas.

    4. The cost of inventory is recognized as an expense in the period in which the related revenue is recognized.

    5. If inventory is written down to NRV, the write-down is charged to expense. Any reversal of such a write-down in a later period is credited to income by reducing that period’s cost of goods sold.

    6.  Required disclosures include:

    • accounting policy and the carrying amount of inventories by category,
    • the carrying amount of inventory carried at NRV and amount of any reversal of a write-down,
    • the carrying amount of inventory pledged as security for liabilities,
    • the cost of inventory charged to expense for the period.

    [1] Net realizable value is selling price less cost to complete the inventory and sell it.