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

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.

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

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

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

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

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

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

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

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

IFRS for SMEs (IFRS for Small and Medium-sized Entities (SMEs)) Practice Test

IFRS for SMEs (IFRS for Small and Medium-sized Entities (SMEs)) Practice Test

IFRS for SMEs) IFRS for SMEs Inventory and Cost 3