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barbjohn.
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canvn2000
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I have a question about inventory.
Company A entered a contract to supply good B to C with price 10
In the year, A purchased material with price 5. At the year end, A estimate that the cost to produced is 11.
So NRV = 10 – 11 = -1.
My question is How do we account for the material with price 5 ?P/s: I think we have to use both IAS 37 for onerous contract and IAS 2
motlax98
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cost to produce plus the materials purchased =5+11=16
cost includes all things than require the goods to be sold this includes the material costs
barbjohn
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If we’re talking about the value of the raw material inventory, then the closing inventory valuation is at $5 unless even that purchase price has now been overtaken by a supplier’s price reduction so the retail value of that raw material inventory would be at the new reduced price
If the inventory is finished / processed goods, then cost of those processed goods is $5 + $11 = $16 but realisable value is only $10 per the contract so the value of the closing inventory of processed goods will be $10
It’s possible that your figure of $11 includes the purchase cost of $5 in which case the value of the closing inventory of finished goods would be the lower of nrv of $10 and costs incurred in bringing the inventory to its current location and condition ie $5 + $6 = $11
So, again the value of the closing inventory of finished goods would be $10
canvn2000
motlax98
barbjohn
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