PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)

QUESTIONS AND ANSWERS (Q&As)

Q&A No. 2018-10

PAS 2 - Scope of disclosure of inventory write-downs

Issue

Is an entity required to disclose a write-down of any inventory at the end of an annual

reporting period or any write-down during the annual reporting period?

Relevant guidance and analysis

Paragraph 36(e) of PAS 2, Inventories, requires the disclosure of the amount of any
write-down of inventories recognized as an expense in the period in accordance with
paragraph 34 of PAS 2.

Paragraph 34 of PAS 2 requires

“…the amount of any write-down of inventories to net realizable value and all losses of
inventories shall be recognized as an expense in the period the write-down or loss
occurs…”

Taken literally this guidance means that any write-down, including any sales below cost
during the reporting period, would be scoped into this disclosure paragraph. However,
the notion of ‘write-down’ is used in the context of the lower of cost and net realizable
value test. An entity only performs this test at a reporting date.

Consensus

An entity is required to disclose only write-downs of inventory held at the end of the
reporting period.

Transition and effective date

The consensus in this Q&A is effective from the date of the approval by the FRSC.

Date approved by PIC: January 31, 2018

(Original signed)

PIC Members

Wilson P. Tan, Chairman

Zaldy D. Aguirre Ma. Gracia F. Casals-Diaz

Chase M. Sarmiento Emmanuel Y. Artiza

Wilfredo A. Baltazar Ferdinand George A. Florendo

Gloria T. Baysa Jose Emmanuel U. Hilado

Rosario S. Bernaldo Lyn I. Javier

Ma. Isabel E. Comedia Arnel Onesimo O. Uy

Jerome Antonio B. Constantino Lovely M. Del Amen

Date approved by FRSC: March 14, 2018