CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)
Ind AS 2 describes the relationship between net realisable value (NRV) and fair value. Which statement is consistent with the Standard?
NRV is an entity-specific value, while fair value is not, so NRV may not equal fair value less costs to sell. NRV is what the entity expects to realise in the ordinary course; fair value reflects a market participant transaction.
- ANRV is entity-specific, whereas fair value is not; NRV may not equal fair value less costs to sellCorrect
- BFair value is entity-specific, whereas NRV is market-based and not entity-specific
- CNRV always equals fair value less costs to sell
- DBoth NRV and fair value are entity-specific values
Explanation
NRV is the net amount an entity expects to realise from sale in the ordinary course of business, so it is entity-specific. Fair value reflects an orderly transaction between market participants and is not entity-specific. Hence NRV may not equal fair value less costs to sell; the option claiming they are always equal is wrong.
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More Inventories (Ind AS 2) questions
- Under Ind AS 2, which of the following is NOT excluded from the scope of the Standard (i.e., is accounted for as inventory under Ind AS 2)?
- Under Ind AS 2, which of the following is included in the costs of conversion of inventories?
- Under Ind AS 2, which pair of cost formulas may an entity use to assign cost to ordinary interchangeable inventories?
- Under Ind AS 2, when may standard cost be used to measure inventory cost?
- Under Ind AS 2, techniques such as the standard cost method may be used to measure the cost of inventories:
- Which of the following is NOT described in Ind AS 2 as falling within the definition of inventories?