You won’t sell your table, unless you are a table-salesman
- Everything you own which will at some point be sold
- raw materials
- intermediate products
- final products ready for sale
- there must a value on the Balance Sheet
- net realizable value → how much you can profit off of all the contents of the inventory
- all resources in inventory were processed into products and sold
-
- costs of raw materials and production (direct attributable costs)
- lower of cost (150) and net realizable value (100) → result 100
- net realizable value → how much you can profit off of all the contents of the inventory
- carrying amount = book value
- write-down: when a product in inventory looses it’s value
- the inventory lost 95% of its estimated value
- BS: inventory -95, equity -95
- PL: -95
- CF: 0 → all Non-Cash Transactions (depreciation, etc) is not reflected in cash flow
- the inventory lost 95% of its estimated value
IAS 2
- a standard on how to calculate the current inventory on the 31.12 of a given year for accounting purposes