Measuring inventory

Question 1

What must the carrying value of inventory be?

Answer 1

lower than its cost price or net realisable value

Question 2

Why does measuring inventory at cost require a cost flow assumption?

Answer 2

because inventory can be purchased at different times at different cost prices

Question 3

2 cost assumptions (permitted under IFRSs)

Answer 3

○ First-in, First-out (FIFO)

○ Weighted average

Question 4

What is the net realisable value of inventory?

Answer 4

the expected selling price, less the expected costs associated with getting the inventory to a saleable state, plus the costs of marketing, selling and distribution