IFRS for SMEs Inventory and Cost Flashcards

An SME sells goods on extended credit with no stated interest. Under IFRS for SMEs, how is inventory revenue recognized?

Answer: At the present value of future cash receipts, with interest income recognized separately

When an SME sells inventory on extended credit with no stated interest, the transaction contains a financing element and revenue is measured at the present value of future receipts.

Under IFRS for SMEs, reversal of an inventory write-down is recognized as:

Answer: A reduction in the amount of inventories recognized as an expense in the period

When a previous write-down is reversed because circumstances have changed, the reversal reduces the cost of inventories expense in the current period.

Under IFRS for SMEs, which cost formula must an SME use for all inventories having a similar nature and use?

Answer: The same cost formula must be applied consistently to all such inventories

IFRS for SMEs requires that the same cost formula be applied to all inventories that have a similar nature and use to the entity.

Which of the following disclosures is required for inventories under IFRS for SMEs?

Answer: The accounting policies adopted, including the cost formula used

IFRS for SMEs requires disclosure of accounting policies for inventory, including the measurement basis and cost formula applied.

Under IFRS for SMEs, where is the expense from inventory recognized when sold?

Answer: In profit or loss as cost of goods sold in the period the revenue is recognized

The carrying amount of inventory is recognized as an expense in profit or loss in the period in which the related revenue is recognized.

An SME uses the retail method to measure inventory. Under IFRS for SMEs, this is acceptable when:

Answer: The results approximate cost

The retail method is an acceptable cost approximation technique under IFRS for SMEs provided it produces results that approximate cost.