Inventory and Heritage

Chapter 7
Inventory
Copyright 2010 McGraw-Hill Australia Pty Ltd

PPTs to accompany Deegan, Australian Financial Accounting 6e
7-1
Objectives of this lecture

Be able to calculate the cost of inventory
pursuant to AASB 102 Inventories
Understand how to apply the lower of cost and
net realisable value rule for measuring inventory
Understand why there is typically a necessity to
make inventory cost-flow assumptions
Be able to apply the inventory cost-flow
assumptions permitted by AASB 102
Know the disclosure requirements of AASB 102

7-2
Introduction
Inventory often accounts for a large proportion
of total assets
Accounting methods used for inventory can have
a significant impact on reported assets and
profits
AASB 102 applies to all inventories except:
work in progress under construction contracts
financial instruments, and
biological assets

7-3
Definition of inventory
Inventories are defined as assets (AASB 102):
held for sale in the ordinary course of business
in the process of production for such sale, or
in the form of materials or supplies to be consumed in
the production process or in the rendering of services
Cost of goods sold:

is the cost of inventory sold during the financial period
can be determined either on a periodic or perpetual
basis

7-4
The general basis of inventory

measurement
Inventories must be measured at the lower of
cost and net realisable value (AASB 102)
on an item-by-item basis
Cost of inventories comprises all (AASB 102):

costs of purchase (i.e. purchase price, import duties,
transport costs, etc.)
costs of conversion (e.g. direct labour and allocation of
overhead costs)
other costs incurred in bringing the inventories to their
present location and condition (e.g. product design
costs for specific customers and installation)

7-5

measurement (cont.)
Costs of inventory exclude (AASB 102):
abnormal amounts of wasted materials

storage costs
administrative overheads
selling costs
Fixed production costs:

are those costs of production that are not expected to
fluctuate as production levels change (e.g. building
depreciation and factory administration costs)

7-6

measurement (cont.)
There are two methods for dealing with fixed

production costs
1. Absorption costing: fixed manufacturing costs
included in cost of inventories
2. Direct costing: fixed manufacturing costs treated as
period costs (i.e. expensed in the period incurred)
AASB 102 requires the use of absorption

costing

7-7

measurement (cont.)
Cost of inventory must include both fixed and
variable production overheads
Indirect production costs that cannot be traced to the
goods or services
Standard costs
Predetermined product costs based, for example, on
planned products and/or operations, planned cost and
efficiency levels and expected capacity utilisation
Only permitted for inventory costing where the
standards are realistically attainable, reviewed
regularly and revised where necessary

7-8

measurement (cont.)
Net realisable value (NRV) (AASB 102)
Estimated selling price in the ordinary course of
business less the estimated costs of completion and
those necessary to make the sale
If NRV is greater than cost, inventory should be

left at cost
Upwards revaluations are not allowed by AASB 102
If NRV is less than cost, inventory should be

written down to NRV
Write-down treated as an expense in the period of the
write-down
Refer to Worked Examples 7.1, 7.2 and 7.3 on

pp. 228, 230 and 231
.

7-9
Discounts for early payment

Discounts received for early payment for debts due
to the supplier of inventory are not to be offset
against the cost of inventory
Discounts given to customers for early payment are
not to be offset against sales
Penalties for late payment are not to be added to the
cost of inventory
Trade discounts provided at the point of purchase
are to be seen as a reduction in the cost of the
inventory

7-10
Borrowing costs
Costs associated with borrowings (e.g. interest) can
sometimes be included in the cost of inventory
Governed by AASB 123 Borrowing Costs
Interest costs can be included as part of the
inventory to the extent that the inventory is deemed
to be a qualifying asset
Qualifying assets are those that necessarily take a
substantial period of time to get ready for their
intended use or sale
Would not be applicable to most inventory being
produced

7-11
Inventory cost-flow assumptions

Cost-flow assumptions must be made where
cost of inventory items fluctuate
Specific identification of items sold and on hand,
although ideal, might be impractical to apply
Cost-flow assumptions used to determine cost of
goods sold and closing inventory
The actual physical flow of goods and the flow
according to the cost-flow assumption might be
different

7-12
Inventory cost-flow assumptions (cont.)

Method adopted should be:
appropriate to the circumstances
applied consistently from period to period
AASB 102 allows the use of one or more of the

following methods:
specific identification
weighted-average cost
first-in first-out (FIFO)
AASB 102 does not permit the use of:

last-in first-out (LIFO)

7-13
Specific identification method

Cost of sales calculated by determining which
item was sold and the specific cost of that item
Ending inventory is costed at the cost of the
specific items on hand at the end of the year
Required to be used for inventory items that are
(AASB 102):
not ordinarily interchangeable, or
goods or services produced and segregated for
specific projects
Not appropriate for large numbers of similar or

identical items (AASB 102)
.

7-14
Weighted-average method
An average cost is based on beginning inventory
and items purchased during the period
Various costs of individual units are weighted by
the number of units
Cost of goods sold and ending inventory are
costed at the average cost

7-15
FIFO method
Goods from beginning inventory and the earliest
purchases are assumed to be the goods sold
first
Consistent with selling behaviour in most entities
Ending inventory assumed to be most recent
purchases
More current value of inventory on balance sheet

7-16
LIFO method
Most recent purchases are assumed to be the
first goods sold
Ending inventory assumed to be the oldest
goods
Inventory could be valued at prices paid some years
earlier
Not allowed in Australia under AASB 102

7-17
LIFO method (cont.)

Allowed in the United States for external
reporting and tax purposes
US companies that elect not to adopt LIFO typically
have higher leverage and lower interest coverage
ratios
Those potentially close to breaching debt covenants
adopt income-increasing and asset-increasing
accounting methods
While some methods might increase income, others
might act to reduce income
Refer to Worked Example 7.4 (p. 235) for a

comparison of the methods
.

7-18
Inventory systems
Determination of cost of sales and inventory
under each cost-flow assumption also depends
on the inventory recording system used
Periodic inventory system
Inventory counted periodically
No continuous records kept of inventory sales
Perpetual inventory system

Running total kept of units on hand
Increases and decreases of inventory recorded as
they occur
See Worked Examples 7.5 and 7.6 (pp. 236 and 237)

7-19
Reversals of previous inventory write-downs

As we know, inventories must be written down if the
net realisable value (NRV) is less than cost
If, in a subsequent period, NRV increases to original
cost or above, the inventory write-down can be
reversedwith a subsequent increase in income
Any subsequent accounting entry to increase the
carrying amount of inventory must be restricted to
the amount that was previously expensed
The value of inventory must not be increased above
its original cost (in keeping with the lower of cost and
NRV rule)
See Worked Example 7.7 (p. 239)Reversal of a
previous inventory write-down

7-20
Disclosure requirements
Where material, AASB 102 requires the
disclosure of the following:
accounting policies for measuring inventories,
including cost formulas used
total carrying amount of inventories
carrying amount of inventories carried at fair value
less costs to sell
amount of inventories expensed during the period
amount of any write-downs expensed in the period
amount of any reversal of any write-down
circumstances leading to reversals of write-downs
carrying amount of inventories pledged as securities
for liabilities

7-21
Summary
The lecture addresses the topic of accounting for
inventory
Under AASB 102, inventory is to be measured at
the lower of cost and net realisable value
Absorption costing and not direct costing should
be applied
To account for the flow of inventory, cost-flow
assumptions are necessary
Allowable methods are specific identification, weightedaverage and first-in first-out
Last-in first-out is not allowed in Australia

7-22
Chapter 9
Accounting for
heritage assets and
biological assets
.

9-1
Objectives of this lecture

Understand what items constitute heritage assets,
and be familiar with the attributes of heritage assets
that differentiate them from other assets
Understand what types of assets can be classified
biological assets and know the unique attributes of
such assets

9-2
Objectives (cont.)
Explain the arguments for and against placing a
valuation on heritage assets
Be aware of the alternative approaches to valuing
heritage assets
Be able to explain why net market value or fair value
has been suggested by some researchers as the
appropriate basis for valuation of biological assets
pertaining to agricultural activity

9-3
Objectives (cont.)
Understand the various issues associated with
changes in the market value of biological assets, and
explain when such changes in value should be
recognised in profit and loss
Be aware of some ongoing accounting debates in
relation to heritage assets and biological assets and
be able to evaluate the logic of the various
arguments supporting or opposing particular
valuation and disclosure approaches

9-4
Accounting for heritage assets

Definition of heritage assets
No single accepted definition
Accounting Standards Board (UK, 2006) suggests:
An asset with historic, artistic, scientific, technological,
geophysical or environmental qualities that is held and
maintained principally for its contribution to knowledge and
culture and this purpose is central to the objectives of the
entity holding it
Includes national parks, national monuments,

museum and library collections, historic buildings,
etc.
Unique and have no alternative use
Generally cannot be replaced

9-5
Accounting for heritage assets (cont.)

Key issues
Should heritage assets be treated in the same
manner as other assets?
Would heritage assets be considered assets in
accordance with AASB Framework?
Are definitions and recognition criteria provided in
conceptual frameworks such as the AASB
Framework appropriate for public sector assets?
How are heritage assets financially measured?
Should heritage assets be financially measured?
No consensus on these issuesanswers will
depend on personal views

9-6

According to the AASB Framework three essential
characteristics are required of an asset
1. The asset is expected to provide future economic benefits
2. The asset must be controlled (as opposed to legally
owned)
3. The transaction or event giving rise to the control must
already have occurred

9-7

Do heritage assets provide future economic benefits?
Heritage assets typically lead to net cash outflows
rather than net cash inflows
Heritage assets provide needed or desired services
to beneficiaries but do they generate probable
economic benefits to the entity that controls them?
Can benefits from heritage assets be considered
economic?

9-8

AASB 116 Property, Plant and Equipment
specifically addresses heritage assets. According to
paragraph Aus6.2:
Examples of property, plant and equipment held by not-forprofit public sector entities and for-profit government
departments include, but are not limited to, infrastructure,
cultural, community and heritage assets
Therefore, it is accepted that property, plant and

equipment held by not-for-profit public sector entities
and for-profit government departments can include
heritage assets

9-9

The Australian Implementation Guidance (found at the
end of AASB 116) states:
This guidance accompanies, but is not part of, AASB 116.
This guidance is pertinent to not-for-profit public sector
entities and for-profit government departments that hold
heritage or cultural assets
G1. In accordance with paragraphs 7(b), 15 and Aus15.1 of
AASB 116, only those heritage and cultural assets that can
be reliably measured are recognised. It depends on the
circumstances as to whether the reliable measurement
recognition criterion can be satisfied in relation to a
particular heritage or cultural asset. Heritage and cultural
assets acquired at no cost, or for a nominal cost, are
required to be initially recognised at fair value as at the date
of acquisition

9-10

Australian Implementation Guidance (found at the end
of AASB 116) (cont.)
Depending on circumstances, it may not be possible to
reliably measure the fair value as at the date of acquisition
of a heritage or cultural asset
G2. Of those heritage and cultural assets that satisfy the
reliable measurement criterion for initial recognition
purposes, paragraph 29 of AASB 116 permits, but does not
require, revaluation

9-11

Hence, from the previous slides we can see that the AASB (and
IASB) believe that heritage assets can, and should, be measured
and disclosed in financial terms
But, some key issues to consider would include:
Is it appropriate to consider a market value when, realistically,
for some heritage assets no market exists?
Is the AASB Framework, as currently developed, appropriate
for issues associated with financial recognition of heritage
assets?
Should all assets be defined in terms of their probability of
generating future economic benefits?

9-12

Who controls heritage assets (and remember, control is a
necessary attribute of assets)?
There are a number of control-related issues that can lead
to questions about whether the objects in question should
be recognised as assets
Which government department ultimately controls the
asset?
Is the asset controlled at the federal, state or local
government level?
It is difficult to prevent access to public heritage assets
(e.g. parks)
There might be restrictions on what can be done with the
asset (e.g. museum collections)

9-13

Are the benefits measurable with reasonable
accuracy?
Heritage assets are unique so access to a writtendown current cost is problematic
Values for similar assets are generally not
available
Raises questions about how an external auditor
might determine the reasonableness of a particular
valuation

9-14

Demand for financial information about heritage assets
If there is limited demand for information, are resources
being wasted to provide the data?
Need to ensure benefits from increased disclosures
exceed costs incurred in generating disclosures
Evidence suggests that, for example, arts institutions in
the English-speaking world do not report their
collections as assets for financial reporting purposes
Questionable whether financial information about
various forms of heritage assets is really necessary

9-15

Measuring heritage assets in financial terms
Major purpose of financial reporting is for management
to demonstrate accountability for resources entrusted
to them
Should only be accountable for things under their
control
Should those in charge of looking after heritage assets
be assessed in terms of financial criteria?

9-16

Measuring heritage assets in financial terms (cont.)
Must accountability be assessed in terms of financial
indicators alone? Views held on this issue will directly
affect an individuals perception of whether heritage
assets should be measured in financial terms
However, accountability itself does not have to be
addressed in financial terms alonearguments for a
broader scope of accountability taking into account a
combination of several qualitative and quantitative
performance indicators, e.g. for museums the quality of
experience provided to visitors

9-17

SummaryArguments against financial disclosure
Often do not provide economic benefits
Determination of control is problematic
Benefits are difficult to quantify in monetary terms
Demand for financial information not established
Accountability of those charged with managing
heritage assets not well assessed in financial
terms

9-18

Approaches to the valuation of heritage assets
Absence of a market for heritage assets
number of alternative approaches have been
developed to place a value on them
Alternative methods include:
contingent valuation method (CVM), which relies
upon a survey administered to a sample of
individuals who are asked how much they would
be willing to pay to retain a particular resource

9-19

Approaches to the valuation of heritage assets (cont.)
Alternative methods include (cont.):
travel-cost method (TCM)collecting data about
costs incurred by individuals who visit a particular
location to determine what individuals are paying to
use that resource
valuation based on market values of surrounding
private properties
past practice of using a notional value of $1, i.e. on
basis that asset would never become available for
sale or alternative development (e.g. art gallery or
museum)

9-20
Accounting for biological assets

Relevant standard applying to agricultural activity is
AASB 141 Agriculture
Agricultural activity is defined in AASB 141 as
management by an entity of the biological
transformation of biological assets for sale, into
agricultural produce, or into additional biological assets
Biological assets defined as a living animal or plant

9-21
Accounting for biological assets (cont.)

Definition of biological asset (also referred to as selfgenerating and regenerating assetsSGARAs)
Examples of directly attributable costs are:
costs of materials and services used or consumed in

generating the intangible asset
costs of employee benefits (as defined in AASB 119
Employee Benefits) arising from generation of the
intangible asset
fees to register a legal right
amortisation of patents and rights that are used to
generate the intangible asset
Refer to Worked Example 8.4 on page 261Amortisation

of research and development

9-22

Definition of biological asset (cont.)
Would include:
trees held as part of a forestry operation

animals held as part of a livestock operation
orchards and vineyards
aquaculture and fishery holdings
Accounting issues arise as a result of the unique

attributes of biological assets

9-23

AASB 141 does not apply to:
an investment in a forest as a carbon sink, which
gives rise to carbon credits that can either be sold or
used to offset pollution caused by the entity
greyhounds, horses, pigeons, and whippets used for
racing
performing animals held by theme parks
non-human living assets other than animals and
plants, such as viruses and blood cells

9-24

AASB 141 also applies to agricultural produce, which is
defined as the harvested product of the entitys biological assets
However, AASB 141 does not apply to products that are the
result of processing after harvest. For example, AASB 141
would apply to grape vines (the biological asset), and grapes
(agricultural produce), but not to wine
The wine, which is a product that results from processing after
harvest, would be covered by AASB 102 Inventories

9-25

AASB 141 adopts directly the definition of assets provided by
the AASB Framework (AASB 141, par. 10)
An entity shall recognise a biological asset or
agricultural produce when, and only when:
(a) the entity controls the asset as a result of past
events
(b) it is probable that future economic benefits
associated with the asset will flow to the entity, and
(c) the fair value or cost of the asset can be
measured reliably

9-26

Key issues associated with biological assets
Since they are unique, do they need a dedicated
accounting standard?
How should biological assets be classified and
presented in financial statements?
How should biological assets be measured?
When and how should revenue associated with
biological assets be recognised?

9-27

Unique nature of biological assets
Natural capacity to grow and/or procreate directly
impacts on value
Great deal of increase in value owing to input of free
goods
Great deal of cost incurred early in the assets life but
economic benefits derived much later
Production cycle might be very long
Not necessarily any direct relationship between
expenditure on asset and ultimate return
So we can see that biological assets pose a number of
fairly unique issues for accountants and accounting
standard-setters

9-28

Classification and reporting in financial statements
Prior to the standard, various classification
systems used
Forestry was classified as:
property, plant and equipment, a separate class of
regenerative assets
Livestock was classified as:

inventory, current (intended for meat) and non-current
inventory (intended for breeding)
Comparability an important attribute of generalpurpose financial reports

9-29

AASB 141Classification requirements
Biological assets are required to be presented
separately in the statement of financial position
(balance sheet)
Does not prohibit classification into current and
non-current elements
Classification as current and non-current will depend on
managements intentions

9-30

How should biological assets be measured?
Prior to AASB 1037 and AASB 141 there was great
variation in valuation methods
For example, valuation of forests in Australia was done
on a historical-cost basis, replacement-cost basis and/or
a market-value basis
Refer to Exhibit 9.2 on page 315Some valuation policies
adopted in relation to forestry assets

9-31

How should biological assets be measured? (cont.)
Limitations in using the historical cost method in relation
to biological assets include:
It ignores accretion in value through natural events
It ignores price changes
It provides irrelevant information
It does not reflect relative values of comparable
forests
It does not satisfy managements accountability
obligations and provides irrelevant information on
performance
It ignores the value of native forests

9-32

Alternative measurement models problematic
Net present value requires numerous decisions or estimates
to be made
Current market values or fair values are difficult to assess
However:
while the market can be volatile, fair value reflects the actual
economic value of the assets at a particular time and is
considered appropriate
there is an active market for livestock at all stages of
development so this approach is easy and more reliable

9-33

Fair value less selling costs to be used to value
biological assets as at the reporting date
Specifically, AASB 141 (par. 12) states:
A biological asset shall be recognised on initial
recognition and at each reporting date at its fair
value less estimated point-of-sale costs, except for
the case where the fair value cannot be measured
reliably

9-34

Fair value less estimated point-of-sale costs is
essentially the same as net market value
Fair value is defined by AASB 141 as the amount for
which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an
arms length transaction

9-35

Gains and losses associated with holding biological
assets (AASB 141, par. 26)
A gain or loss arising on initial recognition of a
biological asset at fair value less estimated point-ofsale costs and from a change in fair value less
estimated point-of-sale costs of a biological asset
shall be included in profit or loss for the period in
which it arises

9-36

Point-of-sale costs (AASB 141, par. 14)
Includes commissions to brokers and dealers, levies
by regulatory agencies and commodity exchanges,
and transfer taxes and duties
Does not include transport and other costs
necessary to get assets to a market

9-37

Assessing fair value
AASB 141 requires that quoted prices from active markets
be used with deductions made for transaction costs such as
costs associated with transportation to point of sale or sale
yard commissions
Active market defined in AASB 141 as a market where all of
the following conditions exist:
The items traded within the market are homogeneous
Willing buyers and sellers can normally be found at any
time
Prices are made available to the public

9-38

AASB 141 states that where there is no active market for
particular biological assets, an entity is to use one or more of
the following, when available, to determine fair value:
The most recent market transaction price, provided that
there has not been a significant change in economic
circumstances between the date of that transaction and
the reporting date
Market prices for similar assets with adjustment to reflect
differences
Sector benchmarks such as the value of an orchard
expressed per export tray, bushel, or hectare, and the
value of cattle expressed per kilogram of meat

9-39

Where market-determined prices or values are not
available for biological assets in their present condition,
AASB 141 suggests that an entity use the present
value of expected net cash flows from the asset
discounted at a current-market-determined pre-tax rate
in determining fair value

9-40

Where a biological asset is not separate from other assets
AASB 141 (par. 25) states:
Biological assets are often physically attached to
land (e.g. trees in a plantation forest). There may be
no separate market for biological assets that are
attached to the land but an active market may exist
for the combined assets, that is for the biological
assets, raw land, and land improvements, as a
package. An entity may use information regarding
the combined asset to determine fair value of
biological assets. For example, the fair value of raw
land and land improvements may be deducted from
the fair value of the combined assets to arrive at a
fair value of biological assets

9-41

Should it still not be possible to measure fair value
reliably on initial recognition, AASB 141 requires
biological assets to be measured at cost less any
accumulated depreciation and any accumulated
impairment losses
Once the fair value of the biological asset can be
measured reliably, the biological asset is measured at
the fair value, less point-of-sale costs (under AASB
141, par. 30)

9-42

When and how should revenue associated with biological
assets be recognised?
AASB 141 (par. 26)
A gain or loss arising from initial recognition of a
biological asset at fair value less estimated point-ofsale costs and from a change in fair values less
estimated point-of-sale costs of a biological asset
shall be included in profit or loss for the period in
which it arises

9-43

AASB 141 also encourages disclosures that differentiate
between changes in fair values, which are based upon price
changes and physical changesAASB 141 (par. 51)
The fair value less estimated point-of-sale costs of a
biological asset can change due to both physical changes
and price changes in the market
Separate disclosure of physical and price changes is useful in
appraising current period performance and future prospects,
particularly when there is a production cycle of more than one
year
In such cases, an entity is encouraged to disclose, by group
or otherwise, the amount of the change in fair value less
estimated point-of-sale costs included in profit or loss owing
to physical changes and owing to price changes
This information is generally less useful when the production
cycle is less than one year (e.g. when raising chickens or
growing cereal crops)

9-44

Accounting for agricultural produce
Agricultural produce of a biological asset is defined by
AASB 141 as the harvested product of the entitys
biological assets
Includes fruit pulled from trees, wool shorn from sheep,
felled logs, slaughtered livestock
AASB 102 Inventory requires inventory to be valued at the
lower of cost and net realisable valuewhat is the cost of
agricultural produce?
AASB 141 (par. 13) states that agricultural produce
harvested from an entitys biological assets shall be
measured at its fair value less point-of-sale costs at the
point of harvest. Such measurement is the cost at the
date when applying AASB 102 or another similar
standard

9-45

Disclosure
AASB 141 (par. 41) requires that an entity
provide a description of each group of biological
assets
Par. Aus43.1 states:
An entity shall disclose the nature of biological assets
and an estimate or relevant indication of their physical
quantity, separately classified between plants and
animals and sub-classified as appropriate to the
circumstances of the entity, showing separately those
biological assets subject to a lease arrangement

9-46

Opposition to AASB 1037 and AASB 141
These standards are the subject of sustained criticism
from members of industries affected by them
Criticisms include:
too academic
provide nothing positive for local companies
make payout ratio look unfavourable
alienate US investors

9-47
Summary
Main topics addressed in the lecture include:
Accounting for heritage assets
Accounting for biological assets that relate to agricultural
activities
Various arguments as to how these assets should be
valued and disclosed were addressed
Arguments for and against the accounting valuation of
heritage assets were set out, with different views being held
by some members of the accounting profession regarding
whether and how heritage assets should be recognised for
accounting purposes

9-48
Summary (cont.)
Also considered were the unique accounting attributes of
biological assetsliving animals and plants
Relative merits of historical cost vs market-based
valuations were considered
The lecture noted that accounting regulators have opted to
adopt market-based/fair valuations for the agriculture
accounting standard
The changes in fair value from one period to the next are
treated as part of the entitys profit or lossa departure
from conventional approaches such as historical cost

9-49

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Chapter 7

Copyright 2010 McGraw-Hill Australia Pty Ltd

Objectives of this lecture

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Cost of goods sold:

Copyright 2010 McGraw-Hill Australia Pty Ltd

The general basis of inventory

Cost of inventories comprises all (AASB 102):

Copyright 2010 McGraw-Hill Australia Pty Ltd

The general basis of inventory

abnormal amounts of wasted materials

Fixed production costs:

Copyright 2010 McGraw-Hill Australia Pty Ltd

The general basis of inventory

There are two methods for dealing with fixed

AASB 102 requires the use of absorption

Copyright 2010 McGraw-Hill Australia Pty Ltd

The general basis of inventory

Copyright 2010 McGraw-Hill Australia Pty Ltd

The general basis of inventory

If NRV is greater than cost, inventory should be

If NRV is less than cost, inventory should be

Refer to Worked Examples 7.1, 7.2 and 7.3 on

Copyright 2010 McGraw-Hill Australia Pty Ltd

Discounts for early payment

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Inventory cost-flow assumptions

Copyright 2010 McGraw-Hill Australia Pty Ltd

Inventory cost-flow assumptions (cont.)

AASB 102 allows the use of one or more of the

AASB 102 does not permit the use of:

Copyright 2010 McGraw-Hill Australia Pty Ltd

Specific identification method

Not appropriate for large numbers of similar or

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Not allowed in Australia under AASB 102

Copyright 2010 McGraw-Hill Australia Pty Ltd

LIFO method (cont.)

Refer to Worked Example 7.4 (p. 235) for a

Copyright 2010 McGraw-Hill Australia Pty Ltd

Perpetual inventory system

Copyright 2010 McGraw-Hill Australia Pty Ltd

Reversals of previous inventory write-downs

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Copyright 2010 McGraw-Hill Australia Pty Ltd

Objectives of this lecture

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Accounting for heritage assets

Includes national parks, national monuments,

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Accounting for heritage assets (cont.)

Copyright 2010 McGraw-Hill Australia Pty Ltd

Accounting for heritage assets (cont.)

Copyright 2010 McGraw-Hill Australia Pty Ltd

Accounting for heritage assets (cont.)

Copyright 2010 McGraw-Hill Australia Pty Ltd