FNST - Bpp Question Bank

anniebabe

Just trying to work through Martin Ltd - pg 401
Bpp Question Bank from 1/9/12
Can someone explain why they have made an adjustment to the soci for damaged goods £250 that were found 4 Nov - year end was 31 October - is it to do with IAS 10?

Many thanks

Steve Collings

I haven't got the Q but your assumption about IAS 10 would be plausible.

If the damaged goods were valued at, say, £500 (cost), on 31 October but a third party said he would give them £250 for them on 4 November to which the company agreed, this is an adjusting event under IAS 10 because this is evidence that net realisable value is lower than cost and so the value of the inventory at 31 October would need to be written down to recoverable amount (£250).

Keep in mind the principle that assets should not be carried in the financial statements at any more than their recoverable amount.

Best wishes
Steve

anniebabe

Hi Steve
In the additional data, it says that - the inventories at close of business on 31/10/x9 were valued at £4987000. On 4/11/x9, goods included in this total at a value of £550000 were found to be damaged and sold for £300000.
So I am assuming it is to do with IAS 10 events after reporting period. There are no other notes to suggest other wise. Just wanted to check I hadnt missed anything.
Thankyou for your input.