IFRS for SMEs) IFRS for SMEs Inventory and Cost 3

Question 1

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

Accepted Answer

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

Answer

At the full nominal amount of cash to be received

Answer

At fair value of goods only

Answer

Deferred until cash is collected

Question 2

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

Accepted Answer

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

Answer

An increase in equity reserves

Answer

An extraordinary item in the income statement

Answer

A deferred credit on the balance sheet

Question 3

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

Accepted Answer

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

Answer

Each warehouse location can use a different formula

Answer

The formula can change annually based on price movements

Answer

Different formulas can be applied by department

Question 4

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

Accepted Answer

The accounting policies adopted, including the cost formula used

Answer

The names of all suppliers

Answer

A detailed aging analysis of all inventory items

Answer

Future committed purchases of inventory

Question 5

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

Accepted Answer

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

Answer

As a direct charge to retained earnings

Answer

As a reduction of the asset's carrying amount only

Answer

Deferred until the cash is collected

Question 6

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

Accepted Answer

The results approximate cost

Answer

It is applied to all inventory categories

Answer

Approved by the tax authority

Answer

Used in conjunction with LIFO