IAS 2 Inventories Requires That When Inventories Are Written Down

question 6

Multiple Choice

IAS 2 Inventories requires that when inventories are written down to net realisable value, they are written-down:

• A) on a class-by-class basis;
• B) on the basis of industry segment;
• C) on an item-by-item basis;
• D) according to geographical segment within the entity.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life.

Fixed Costs

Business expenses that remain constant regardless of changes in production volume, such as rent, salaries, and loan repayments.

Variable Cost

Costs that vary in direct proportion to changes in the level of production or sales.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment leases.