IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

Required Compute the valuation of the inventory of Moonstruck Enterprises at December 31, 200X, under lAS 2 using the "lower of cost and NRV" principle. Solu tion

Quantity on hand 100

Cost per unit ($) 1,000 500 1,500

Inventory at cost ($) 100,000 100,000 450,000 300,000 125 000 $1075 000

NRV per unit ($) 1,020 450 1,600

Lower of cost and NRV($) 100,000 90,000 450,000 300,000 100000 $1040 000

Product line Sofas Dining tables Beds Closets Lounge chairs

200 300 400 500

750 250

770 200

9. RECOGNITION OF EXPENSE Whe n inventory is so ld, the carrying amount of inventory sho uld be recognized as an expense whe n the related revenue is recognized. Moreover, the amo unt of any inventory written down to net realizable va lue is recogn ized as an expense . The amount of any reversa l of wri te-down of inventory should be a red uction to the amo unt wri tten off in the pe riod it was reversed. 10. DISCLOSURE The fin ancial statements should disclose • Accounting policies adopted for measu ring inventories and the cos t flow assumption (i.e., cost formula) used • Total carrying amoun t as well as amounts classified as appropriate to the en tity • Carrying amount of any inve ntories carried at fai r va lue less costs to se ll • Amount of inventory recognized as expense du ring the period • Amount of any write-down of inventories recogn ized as an expense in the period • Amount of any reversa l of a wri te-down to net realizable va lue and the circumstances that led to such reversal • Circumstances requi ring a reversal of the wri te-down • Carrying amount of inventories pledged as security for liabilities 11, EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS 11.1 LECTRA, Annual Report 2006 Not es to Financial Statements Accounting Policies In ventories Inventories of raw materials are valued at the lower of purchase cost (based on weighted-average cost, including related costs) and their net realizable value. Finished goods and works in progress are valued at the lower of standard industrial cost (adjusted at year-end on an actual cost basis) and their net realizable value. Cost price does not include interest expense. A write-down is recorded if net realizable value is less than the book value. Write-downs on inventories of spare parts and consumables are calculated by comparing book value and probable net realizable value after a specific analysis of the rotation and obsolescence of in– ventory items, taking into account the utilization of items for maintenance and after-sales services ac– tivities, and changes in the range of products marketed. 11.2 BASF, An nual Report 2006 Notes to the Financial Statements 14. Inventories (In euras millions) Raw materials and factory supplies Work-in -process finished goods and merchandise Advance payments and services-in-process 2006

2005 121 3.8 4,148.5 67.9 54302

1,656.0 4,962.0 54.4 6672 4