PRC-1 · Chapter 7 · Question 98 of 100
Which fundamental accounting concept primarily drives the IAS 2 requirement to write down inventory to Net Realizable Value when it falls below cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The Prudence concept.
Explanation
The prudence concept dictates that assets should not be overstated and that foreseeable losses should be recognized immediately. Writing down inventory to NRV ensures the asset is not carried at more than it will realize.
More IAS 2: Inventories MCQs
- Q100Which of the following items is explicitly prohibited by IAS 2 from being included in the cost of inventories?
- Q1Which of the following costs is NOT included in the cost of inventory according to IAS 2?
- Q2When calculating the Net Realizable Value (NRV) of an inventory item, which of the following is correct?
- Q3When inventory is sold, how is its carrying amount treated in the financial statements?
- Q4Which of the following statements correctly distinguishes between the periodic and perpetual inventory systems?