See more at: http://24ivalue.com/module/inventories/ „ESTIMATES: PROVISION FOR DOUBTFUL DEBT, INVENTORY PROVISIONS, PROVISIONS FOR LIABILITIES” Training on accounting and income tax aspects related to financial year-end closing of 2014. Common errors and fast remedies. SELF-CHECK OF ACCOUNTING CALCULATIONS 24iValue is an additional tool to traditional consulting in the financial and tax reporting and in many instances it can replace such consulting. See what kind of services are available in 24iValue ! The 24iValue service is not focused on presenting technical aspects, regulations, interpretations, jurisdiction, etc. but places stress on solving accounting and reporting problems. The 24iValue service is not focused on presenting technical aspects, regulations, interpretations, jurisdiction, etc. but places stress on solving accounting and reporting problems. The support provided to users by 24iValue results from an innovative web application combining a number of financial audit techniques and methods with an expanded systems of tooltips and help. How to calculate cash flow? How to calculate deferred tax? How to calculate inventory provision? How to calculate provision for debtors? Find us: http://24iValue.com/ facebook.com/24EasyAudit linkedin.com/company/24easyaudit slideshare.net/24EasyAudit twitter.com/24EasyAudit

1. .
Financial year-end closing of 2014
Module 1 Part 1 /3
„ESTIMATES: PROVISION FOR DOUBTFUL DEBT,
INVENTORY PROVISIONS, PROVISIONS FOR
LIABILITIES”
Training on accounting and income tax aspects related to financial year-end closing of
2014. Common errors and fast remedies.

2. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
• Module 1: Estimates: provision for doubtful debt, inventory provisions, provisions for
liabilities
• Module 2: Fixed assets: impairment testing of fixed assets, depreciation, accounting for
financial leasing
• Module 3: Cash flow statement
• Module 4: Corporate income tax, recognition of income and expenses – Deferred tax and
Corporation tax
• 24EasyAudit: Information on the Web application supporting accounting at balance sheet
closing for 2014
Content of the training
.

3. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
Module 1: Inventory provisions
.
Do you know that …?
Often percentage indicators of provisions for
inventories are applied subject to the aging of
the inventories – however no analysis is
subsequently performed if the applied
percentage indicators are reasonable.
Backtesting if the assumptions are accurate
will help avoid material errors in provisions for
inventories.
Click here to watch a tutorial video

4. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
Module 1: Inventory provisions
Theory:
• Provisions for inventories should be made
as a result of impairment or as a result of
valuation to net realisable prices in place
of purchase prices or manufacturing costs.
• The principle of prudent valuation requires
updates of asset valuation => update of
asset value (IAS 2 par 28,33)
• Recorded prices of inventories – purchase
or manufacturing costs – may not be
higher than the net realizable prices „NRV”
(IAS 2 par. 9)
.
Practice - examples of errors:
• Most often inventories are overvalued
• No provision is calculated in respect of
slow-moving or obsolete inventories
• Reference of evidence prices is not made
to net realisable prices
• Provision estimates are unrealistic, not
related to the actual values of the written
down inventories and the their useful life.

5. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
Module 1: Inventory provisions
Real life example:
• Finished product ABC, quantity 100 pcs as
at 31.12.2014, book value GBP 1,000,
average sales price (sales report) from
January 2014 is GBP 8
• Material XYZ, quantity 100 kg as at
31.12.2014, book value GBP 6,000, the
whole stock has been in the warehouse for
over 1 year (as per the aging report), as at
31.12.2013 the value of GBP 8,000,
scrapped value in 2014was GBP 1,000
.
Solution – how should provisions for
inventories be calculated …?
• Valuation of ABC to be subject to NRV
provision, sales price below evidence price
=> provision of GBP 200 (<= 100 x 8 –
1,000)
• XYZ can be treated as a slow-moving
stock. The inventory provision can be
calculated on the basis of history =>
% 𝑝𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛 =
6,000 + 1,000
8,000
= 87.5%
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑝𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛 𝑎𝑚𝑜𝑢𝑛𝑡 = 87.5% × 6,000 = £ 5,250 𝑎𝑠 𝑎𝑡 31. 𝐷𝑒𝑐. 12

6. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
Module 1: Inventory provisions
Errors can arise when:
• You have no precise idea how to calculate
provisions for inventories (e.g. provision for
merchandises)
• You do not refer your calculation of the
provision to what happened to the
inventories in the past (aging analysis,
written-off inventories, etc.)
• You have scarce information and this is
the only thing you can rely on in calculating
the provisions on inventories
• You have no opportunity for an
independent verification of your
calculations
.
Support provided by the 24iValue
provision calculator …?
• With 24iValue you will assess if the
inventory provisions are reasonable or
your will calculate the provisions.
• With tested auditing techniques underlying
24iValue, you will calculate the provision in
no time and you will check if the applied
rules are reasonable.
ATTENTION: With 24iValue and in built
modul you can quickly calculate provision for
slow moving inventory- click here to find out
more information about calculation of
inventory provisions with support of 24iValue.

7. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
24iValue helps to check and calculate
24iValue Expert System supports accounting,
auditing and consulting in specialized
calculations such as:
• Cash flow statement (in accordance with IFRS)
• Deferred tax and UK corporation tax
• Valuation and market value
• Valuation of financial instruments
• Testing for impairment of fixed assets
• Provisions for debtors
• Inventory provisions
• Provisions for liabilities, including provisions for
unused holiday accruals, retirement bonus,
warranty expenses
• Finance lease
.
Click here to watch a video
Click here to watch a tutorial video

8. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
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9. © 2014 EASYAUDIT Sp. z o.o. with its registered office in Gdynia. All rights reserved. December 2014 http://24ivalue.com/.
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