[Marc]

@ukhn said:
IAS2 – Because they sell this equipment therefore its stock!
IAS 16 is Assets like PP&E and IAS 11 is constuction contracts where you are building PPE for own use that you capitalise

Risks – Hold WIP at lower of cost at NRV, risk that returned stock is obselete but still held at cost therefore stock overstate and expense understated.

Evidence
Its ias 2
issues were..establishing how much is stock and how much is obsolete stock but still recorded at cost etc

They were building bespoke assets and alot of it was returned and therefore no resale value as such leading to obsolescence and stock over stated.

1-obtain stock requisition sheets to establish level of stock at year end! and incomplete machinery would be held as stock ensure any returns are excluded for obsolescence reasons

2-Obtain purchase document of components that form part of WIP machinary and verify cost and confirm the same to bank payments

3 – For any revenue recorded in relation to WIP confirm that the product it relates to is not on the stock counts sheet and that its delivered to customer before year end

4 – spoke about provision for returned stock as well – can’t remember the evidence i wrote tho

Just a note… ias 11 and 18 have been superceded by IFRS 15

[Marc]

Hi Mike,

Understand you are busy with the questions but having gone through the 5 steps, it seems reasonable however, when a loss on a contract occurs, do you amortise over the life of the contract??

Thanks
Marc

[Author]

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