Inventory provisions
Real life example:
Solution - how should provisions for inventories be calculated ...?
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Next - Finished product ABC, quantity 100 pcs as at 31.12.2023, book value GBP 1,000, average sales price (sales report) from January 2023 is GBP 8
- Material XYZ, quantity 100 kg as at 31.12.2023, book value GBP 6,000, the whole stock has been in the warehouse for over 1 year (as per the aging report), as at 31.12.2022 the value of GBP 8,000, scrapped value in 2023 was GBP 1,000
Solution - how should provisions for inventories be calculated ...?
- Valuation of ABC to be subject to NRV provision, sales price below evidence price => provision of GBP 200 (<= 100 x 8 ? 1,000)
- XYZ can be treated as a slow-moving stock. The inventory provision can be calculated on the basis of history
