Destroyed inventory
Goods destroyed are inventory lost through events such as fire or flooding. Remove their carrying amount from inventory and recognise the loss appropriately; abnormal inventory losses are expensed rather than included in the cost of remaining units. In incomplete-records questions, estimate the cost lost using reliable inventory records or a trading reconstruction. Account for any insurance recovery separately under the applicable requirements.
Worked example
Inventory with a carrying amount of $5,000 is completely destroyed in a fire and has no saleable salvage. Remove $5,000 from inventory and recognise the loss. Assess any insurance recovery separately rather than leaving the lost inventory recognised while the claim is unresolved.
Common mistake
A gross profit margin is a percentage of sales, while mark-up is a percentage of cost; confusing them misstates estimated inventory lost.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | F3 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Inventory destroyed, Goods destroyed