This is Steve Chen, FCCA. Recently I got a question from my student who is a financial manager in a large retail business.

The question is, can we apply the concept of 'recoverable amount' when determining whether inventories are impaired?

The quick answer is no as the recoverable amount is the concept in IAS 36 Impairment of assets - specifically to non-current assets rather than inventories. Inventories impairment should be accounted for under IAS 2 Inventories by applying the concept of net realisable value.

However, the NRV concept is different from the fair value per IFRS 13 Fair Value Measurement - as NRV would be based on the value/input from management (largely level three input per IFRS 13) whereas IFRS 13 requires level 1 and 2 input to be used before the level 3 input.

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