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If inventory according to IAS 2 inventory must be valued at the lower of cost and NRV!
Audit risk identified inventory as obsolescence during count which means inventory can be overvalued by the client if not written down or no allowance !What do IAS 2 means ? Does it means for instance the auditor tests detailed cost and NRV and take the lower of the valued calculated ? Let’s inventory costs is $30 and NRV $50! Do we take the 30 for record?
Cost maybe the valuation using FIFO or LIFO!
NRV = selling price – cost of selling the item.Yes – you can NEVER measure inventory at more than it’s cost (as that would effectively be taking profit before revenue has been earned).
But you MUST write-down inventory if the net amount you expect to receive (i.e. selling price – cost of selling) is less than cost.
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