Page 2 - 7. COMPILER QB - INDAS 2

INDAS – 2

INVENTORY

(TOTAL NO. OF QUESTIONS – 11)

INDEX

S.No. Particulars Page No.

1 RTP Questions 7.1

2 MTP Questions 7.7

3 Past Exam Questions 7.10

RTPs QUESTIONS

Q1 (May 18)

On 31 March 20X1, the inventory of ABC includes spare parts which it had been supplying to a number of

different customers for some years. The cost of the spare parts was Rs 10 million and based on retail prices at
31 March 20X1, the expected selling price of the spare parts is Rs 12 million. On 15 April 20X1, due to market

fluctuations, expected selling price of the spare parts in stock reduced to Rs 8 million. The estimated selling
expense required to make the sales would be Rs 0.5 million. Financial statements were authorized by the

Board of Directors on 20th April 20X1.
As at 31st March 20X2, Directors noted that such inventory is still unsold and lying in the warehouse of the

company. Directors believe that inventory is in a saleable condition and active marketing would result in an
immediate sale. Since the market conditions have improved, the estimated selling price of inventory is Rs 11

million and estimated selling expenses are the same Rs. 0.5 million.
What will be the value inventory at the following dates?

(a) 31st March 20X1

(b) 31st March 20X2
SOLUTION

As per Ind AS 2 ―Inventories‖, inventory is measured at lower of ―cost‖ or ―net realisable value‖. Further, as per

Ind AS 10: ―Events after Balance Sheet Date‖, decline in net realisable value below cost provides additional
evidence of events occurring at the balance sheet date and hence shall be considered as ―adjusting events‖.

(a) In the given case, for valuation of inventory as on 31 March 20X1, cost of inventory would be Rs. 10
million and net realisable value would be Rs. 7.5 million (i.e. Expected selling price Rs. 8 million-

7.1