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CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)

Ganga Textiles Ltd wrote down inventory by Rs 5,00,000 to net realisable value in 2025-26. In 2026-27, because selling prices recovered, NRV of the same inventory rose and a reversal of Rs 3,00,000 (within the original write-down) was made. How should the reversal be presented under Ind AS 2?

The Rs 3,00,000 reversal reduces the inventories expense of 2026-27. Ind AS 2 requires a reversal of a write-down, arising from higher net realisable value, to be recognised as a reduction in the amount of inventories recognised as an expense in the period of reversal.

  1. AAs other income in the statement of profit and loss
  2. BAs a reduction in the amount of inventories recognised as an expense in 2026-27Correct
  3. CAs an adjustment to opening retained earnings of 2026-27
  4. DAs a revaluation surplus in other comprehensive income

Explanation

Ind AS 2 says the reversal of a write-down arising from an increase in NRV is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. So the Rs 3,00,000 reduces the inventory expense of 2026-27. Showing it as other income or in OCI is not the prescribed treatment.

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