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CFA Level 1 Question of the Week - Financial Reporting and Analysis

A firm following IFRS reports its inventory with the carrying value of $450,000. If the net realizable value of inventory is $500,000, then the amount of the gain/loss on write-down of inventory is closest to:

CFA Level 1 Question of the Week - Financial Reporting and Analysis 6 votes

A. $0.
66% 4 votes
B. a $50,000 loss.
0% 0 votes
C. a $50,000 gain
33% 2 votes
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Comments

  • Matt_AnalystPrepMatt_AnalystPrep MontrealPosts: 90 Associate
    The correct answer is A.

    Under IFRS, the value of inventory is written down if the carrying value of inventory is greater than the net realizable value (NRV) (or the selling price minus the selling cost). Since the carrying value of inventory is less than the NRV, the inventory will not be written down and no loss will be recognized.
    AnalystPrep
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