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Under IFRS, the comparison used to write inventory down when its value falls below cost is cost versus which measure?
ANet realisable value
BOriginal purchase price
CHistorical replacement cost
DFuture selling commission
Answer & Solution
Correct answer: A. Net realisable value
1. IFRS requires inventory to be carried at the lower of cost and net realisable value.
2. Net realisable value reflects the expected selling amount less costs to complete and sell.
3. The write-down compares cost against net realisable value.
4. Rule out original purchase price, which is simply cost and cannot be compared against itself.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.3 "Lower of Cost or Net Realisable Value", p.122_
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