Professional Documents
Culture Documents
Accounting For Inventories FRS 102
Accounting For Inventories FRS 102
Accounting For Inventories FRS 102
LEARNING OUTCOMES
At the end of the lesson students should
be able to:
Describe the definition of inventories.
Describe the accounting treatment recommended by
FRS 102 for inventories.
Discuss the nature of inventories.
Explain how this should be accounted for in accordance
with accounting standards.
Describe the accounting treatment recommended by
FRS 102 Accounting for Inventories.
Slide 2 of 15
Definition: Inventories
FRS 102 applies to all inventories except for items
covered by other specific standards such as:
Work-in-progress under construction contracts (FRS 111);
Financial instruments (FRS 132 and FRS 139);
Biological assets (FRS 141)
It also does not apply to measurement of inventories by:
Producers of agricultural and forest products, agricultural produce after
harvesting; minerals and minerals rights, to the extent they are valued at net
reliasable value;
Commodity brokers who measure inventories at fair value less cost to sell.
Slide 3 of 15
Definition of cost
Cost of inventories should comprise of
expenditure which has been incurred in the
normal course of business in bringing the
product or service to its present location and
condition.
Such cost
overheads.
will
include
all
related
production
Slide 4 of 15
Slide 5 of 15
Slide 6 of 15
Slide 7 of 15
Measurement
Fundamental principle under FRS 102:
Inventories are to be measured/stated at the
lower of cost and net reliasable value.
FRS 102 defines net realisable value as
estimated proceeds from the sale of items
(estimated selling price in the ordinary course of
business) less all further costs to completion and
less all costs to be incurred in marketing, selling
and distributing directly related to the items in
question.
Slide 8 of 15
Measurement
Example: RST has in stock 100 units of product Y
which it had acquired for RM15 per unit. The
stock can be sold at RM21 per unit and the
selling costs is estimated at RM2 per unit. The
net reliasable value of one unit is RM21 less RM2
= RM19. Cost is less than net reliasable value
and so the stock will be disclosed at RM15 x 100
= RM1,500.
Suppose the stock were damaged and could be
sold for RM10 each, the net reliasable value per
unit will be RM8. The stock will be accounted for
at RM8 x 100 units = RM800.
BM0157-3.5-2 Financial Reporting
Slide 9 of 15
Slide 10 of 15
Methods of Valuation
Slide 11 of 15
Slide 12 of 15
Slide 13 of 15
Q&A
BM0157-3.5-2 Financial Reporting
Slide 14 of 15
Thank You
Slide 15 of 15