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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Inventory Valuation
Method of valuation of inventory was changed from FIFO to AVCO. Inventory at 30 september 20×9 is 20m under FIFO and same would have been 18m under AVCO. On 30 sept 20×8, under FIFO it was 15m but under AVCO 13.4m .
How is the change in profit accounted for ?
Please,can you explain this question along with the workings,to calculate change in profit .
Hi,
The change from FIFO to AVCO is a change in accounting policy as we are changing how we measure the inventory, so would be dealt with under IAS 8.
We would therefore restate the prior year figures from 13.4m to 15m, with the difference going through the SOCIE as an adjustment to the opening retained earnings.
The current year inventory is then increased from 18m to 20m in the current accounting period by adjusting the inventory figures in cost of sales and on the SFP in current assets.
Thanks