December 2018 Question 3-(a) problem:

Fill is a coal mining company and sells its coal on the spot and futures markets. On the spot market, the commodity is traded for immediate delivery and, on the forward market, the commodity is traded for future delivery. The inventory is divided into different grades of coal. One of the categories included in inventories at 30 November 20X6 is coal with a low carbon content which is of a low quality. Fill will not process this low quality coal until all of the other coal has been extracted from the mine, which is likely to be in three years’ time. Based on market
information, Fill has calculated that the three-year forecast price of coal will be 20% lower than the current spot price

The directors of Fill would like advice on two matters:
(i) whether the Conceptual Framework affects the valuation of inventories;
(ii) how to calculate the net realisable value of the coal inventory, including the low quality coal.

Examiners ans:
The Framework acknowledges a variety of measurement bases including historical cost, current cost, net realisable value (NRV) and present value. It refers to NRV as a settlement value which will be determined by a future transaction. Thus in order to determine NRV, the directors would need to refer to IAS 2 Inventories for the definition and IAS 10 Events
after the Reporting Date. The directors should consider any adjusting events which provide evidence of conditions which existed at the end of the reporting period in order to determine NRV. IAS 2 defines NRV as the estimated selling price in the ordinary course of business less the costs of completion and costs of sale. In this case, the NRV will be determined on the basis of conditions which existed at the date of the statement of financial position. IFRS 13 Fair Value Measurement does not apply to IAS 2 as regards NRV even though the measurement method is very similar. Any future price movements will be considered if they provide information about the conditions at the date of the statement of financial position but normally these movements would reflect changes in the market conditions after that date and therefore would not affect the calculation of NRV. The NRV will be based upon the most reliable estimate of the amounts which will be realised for the coal. The year-end spot price will provide good
evidence of the realisable value of the inventories and where the company has an executory contract to sell coal at a future date, then the use of the forward contract price may be appropriate. However, if the contract is not executory but is a financial instrument under IFRS 9 Financial Instruments or an onerous contract recognised as a provision under IAS 37
Provisions, Contingent Liabilities and Contingent Assets, it is unlikely to be used to calculate NRV.

Problem> I dont underested that why examiners applied IAS 10, 37 , IFRS 9.