Understanding Australian Accounting Standards 3E - Loftus - SMch12_sm_loftus

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1、SolutionsManualtoaccompanyUnderstandingAustralianAccountingStandardsJaniceLoftus,KenLeo,RuthPicker,VictoriaWise,KerryClarkByKenLeoJohnWiley&SonsAustralia,Ltd2013Chapter12:InventoriesChapter12:InventoriesComprehensionquestions1.Define‘cost’asappliedtothevaluationofinventory.Thecostofinven

2、toriesistheaggregateof:·Thecostsofpurchase·Thecostsofconversion·Othercoststobringtheinventoriestotheirpresentlocationandcondition.Discusseachtypeofcostwithappropriateexamples.2.Whatismeantbytheterm‘netrealisablevalue’?Isthisthesameasfairvalue?Ifnot,whynot?Netrealisablevalueisthenetamount

3、thatanenterpriseexpectstorealisefromthesaleofinventoryintheordinarycourseofbusinessandisdefinedinAASB102paragraph6as:theestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.Assuch,netrealisablevalueisspecifictoanind

4、ividualenterpriseandisnotnecessarilyequaltofairvaluelesscoststosell.Fairvalueisdefinedas‘theamountforwhichanassetcouldbeexchanged,oraliabilitysettled,betweenknowledgeable,willingpartiesinanarm’slengthtransaction’(AASB102,paragraph6).3.Explaintheconceptoflowerofcostandnetrealisablevaluefo

5、rinventory.Paragraph9ofAASB102requiresthat‘Inventoriesshallbemeasuredatthelowerofcostandnetrealisablevalue’.Asthepurposeofacquiringormanufacturinginventoryitemsistosellthemataprofitinventorywillinitiallyberecognisedatcost.Thiscostisperiodicallycomparedtotheinventory’snetrealisablevalueto

6、determineifthesaleoftheinventorywillrecoveratleastitscost.Ifcostisnotexpectedtoberecoveredtheinventoryiswrittendowntonetrealisablevalue.Thepurposeofthismeasurementruleistoensurethatinventoryitemsarenotreportedatvaluesabovetheirexpectedfuturebenefits.Twospecificindustrygroupshavebeenexemp

7、tedfromapplyingthelowerofcostandnetrealisablevaluerule,namely:(a)producersofagriculturalandforestmineralproducts,totheextentthattheyaremeasuredatnetrealisablevalue,and(b)commoditybroker-traderswhomeasuretheirinventoriesatfairvaluelesscoststosell.©JohnWileyandSonsAustralia