We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Are the Best Tips for Treatment of IFRS Inventory?

By Osmand Vitez
Updated Feb 10, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Inventory accounting is one of the busiest accounting activities as a company’s inventory may be its second largest asset behind human capital. IFRS inventory accounting has specific guidelines a company must follow in order to properly maintain the value of goods on the accounting ledger. A few universal guidelines for most companies with inventory include measuring inventory at cost, writing down inventory to net realizable value, and making disclosures about inventory accounting practices. Other IFRS inventory accounting guidelines fall in with IFRS revenue accounting guidelines. The guidelines for this accounting practice relate more to revenue recognition, which is a different topic for accounting purposes.

Companies need to record inventory at historical cost or what the original purchase price was for the goods. Other costs recorded in the IFRS inventory account include taxes, freight, handling, costs to convert raw materials into sellable inventory, and similar costs that place inventory into a certain location or sellable state. All these costs should be net of purchase price discounts received when purchasing inventory because the discounts lower the amount paid for the goods. Proper historical cost is critical for IFRS inventory as a company can easily attempt to increase its book value through fictitious inventory values. External audits typically review this account heavily in order to ensure the accuracy and validity of inventory balances in the accounting ledger.

Net realizable value is a method IFRS inventory accounting guidelines use to ensure accuracy for a company’s inventory. For accounting purposes, the net realizable value is the estimated selling price less estimates for the cost of completion or cost estimates for activities necessary to sell the inventory. When a company needs to make an inventory write-down, the result is an expense posted to the income statement. Though called an expense, the amount actually goes into the company’s cost of goods sold account. A reversal is possible for net realizable value, with the entry being the opposite of the one described above.

Disclosures represent statements made in addition to the financial statements released for use by stakeholders. IFRS inventory guidelines require disclosures on inventory accounting policy, carrying amount, and fair value carrying amount in addition to inventory write-downs, net realizable reversals, inventory carried as collateral, and cost of inventories recognized as an expense. Other disclosures may also be necessary, but these are the ones that relate to inventory. Companies should check with a licensed accountant on IFRS inventory accounting in order to ensure their financial statements are accurate and valid.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.