Obsolescence
An obsolete item may remain usable or saleable, so its accounting depends on evidence and on the asset’s applicable standard. For inventory, assess cost against net realisable value under IAS 2. For property, plant and equipment, obsolescence may indicate impairment under IAS 36 and can also affect estimates of useful life or residual value.
Worked example
A batch of old phones cost $10,000. Estimated selling proceeds are $6,000 and selling costs $500; net realisable value is $5,500, giving a $4,500 inventory write-down.
Common mistake
Applying IAS 36 recoverable amount directly to inventory, or assuming all outdated goods have zero value.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Supporting | September 2026–June 2027 |