Where the Net Realisable Value of Inventory Falls Below Cost

question 2

Multiple Choice

Where the net realisable value of inventory falls below cost, IAS 2 Inventories, requires that:

• A) the inventory continue to be carried in the Statement of Financial Position at cost;
• B) the inventory be written down to net realisable value;
• C) no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements;
• D) the difference be added to the carrying amount of the inventory.

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Definitions:

M3

M2 plus large-denomination time deposits.

M1

A category of the money supply that includes physical currency and coins, demand deposits, traveler’s checks, and other checkable deposits.

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money.

M3

A measure of the money supply that includes M2 plus large time deposits, institutional money market funds, and short-term repurchase and other larger liquid assets.