PRC-1 · Chapter 7 · Question 34 of 100
If the circumstances that previously caused inventory to be written down below cost no longer exist, and the NRV has increased, what is the correct accounting treatment?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The amount of the write-down is reversed so that the new carrying amount is the lower of the cost and the revised NRV.
Explanation
IAS 2 requires a new assessment of NRV in each subsequent period. If circumstances change, the write-down is reversed (limited to the amount of the original write-down) so the asset reflects the lower of original cost and revised NRV.
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