Where the net realisable value of inventories falls below cost, AASB 102 Inventories requires that:
A) no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements.
B) the difference be added to the carrying amount of the inventories.
C) inventories continue to be carried in the statement of financial position at cost.
D) inventories be written down to net realisable value.

Question

Quizplus · Accepted Answer

AASB 102 requires that inventories be measured at the lower of cost and net realisable value. When the net realisable value of inventories falls below cost, the inventories must be written down to net realisable value. This is necessary to ensure that the carrying amount of inventories is not overstated in the financial statements. Therefore, option D is the best choice.

Where the Net Realisable Value of Inventories Falls Below Cost