This document provides information on inventory accounting according to IAS 2. It discusses key topics such as the objective and scope of IAS 2, definitions of inventory, measurement of inventory costs including conversion costs, cost formulas, and net realizable value. Inventory is measured at the lower of cost or net realizable value. Cost includes all costs to bring inventory to its present location and condition. The document also provides examples to illustrate inventory costing and the calculation of net realizable value.
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Used for MBA professional accounting class room presentation and it includes FASB rules and forex currency dealings details for purchase and sale of goods and services with foreign party.
This is the third presentation for the University of New England Graduate School of Business unit GSB711 - Managerial Finance. It explores the time value of money, using examples to help students clarify this concept.
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
Kotler on Marketing (1999) is a modern management classic. Based on Kotler’s popular lecture series, it condenses the expertise from his world-renowned marketing textbooks into an invaluable manual for managers.
About the Author
Philip Kotler is considered one of the world's foremost experts on marketing. He is a professor of international marketing at Northwestern University’s Kellogg School of Management, and his book Marketing Management has been used to teach marketing in over 58 countries around the world. Kotler has also authored or coauthored over 50 other books, including Principles of Marketing, Marketing Models, and The Marketing of Nations.
Used for MBA professional accounting class room presentation and it includes FASB rules and forex currency dealings details for purchase and sale of goods and services with foreign party.
This is the third presentation for the University of New England Graduate School of Business unit GSB711 - Managerial Finance. It explores the time value of money, using examples to help students clarify this concept.
DuPont analysis is a useful technique to break down the different return on equity (ROE) generators. The ROE decomposition helps investors to concentrate separately on key indicators of financial success to define strengths and weaknesses.
Three main financial metrics drive equity return (ROE): operating performance, asset usage performance, and financial leverage. Operating output is a net profit margin or a net income separated by overall revenue or profits.
The efficiency of asset usage is determined by the turnover ratio of the assets. Leverage is calculated by the equity multiplier, equal to average assets divided by average equities.
The component parts of a firm's return on equity (ROE) are calculated using a DuPont analysis. This allows an investor to assess, which financial activities contribute the most to the ROE changes
Kotler on Marketing (1999) is a modern management classic. Based on Kotler’s popular lecture series, it condenses the expertise from his world-renowned marketing textbooks into an invaluable manual for managers.
About the Author
Philip Kotler is considered one of the world's foremost experts on marketing. He is a professor of international marketing at Northwestern University’s Kellogg School of Management, and his book Marketing Management has been used to teach marketing in over 58 countries around the world. Kotler has also authored or coauthored over 50 other books, including Principles of Marketing, Marketing Models, and The Marketing of Nations.
Inventory management refers to the process of ordering, storing, using, and selling a company's inventory. This includes the management of raw materials, components, and finished products, as well as warehousing and processing of such items. There are different types of inventory management, each with its pros and cons, depending on a company’s needs.
The Benefits of Inventory Management
A company's inventory is one of its most valuable assets. In retail, manufacturing, food services, and other inventory-intensive sectors, a company's inputs and finished products are the core of its business. A shortage of inventory when and where it's needed can be extremely detrimental.
At the same time, inventory can be thought of as a liability (if not in an accounting sense). A large inventory carries the risk of spoilage, theft, damage, or shifts in demand. Inventory must be insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply destroyed.
For these reasons, inventory management is important for businesses of any size. Knowing when to restock inventory, what amounts to purchase or produce, what price to pay—as well as when to sell and at what price—can easily become complex decisions. Small businesses will often keep track of stock manually and determine the reorder points and quantities using spreadsheet (Excel) formulas. Larger businesses will use specialized enterprise resource planning (ERP) software. The largest corporations use highly customized software as a service (SaaS) applications.
Appropriate inventory management strategies vary depending on the industry. An oil depot is able to store large amounts of inventory for extended periods of time, allowing it to wait for demand to pick up. While storing oil is expensive and risky—a fire in the U.K. in 2005 led to millions of pounds in damage and fines—there is no risk that the inventory will spoil or go out of style.
1
For businesses dealing in perishable goods or products for which demand is extremely time-sensitive—2021 calendars or fast-fashion items, for example—sitting on inventory is not an option, and misjudging the timing or quantities of orders can be costly.
For companies with complex supply chains and manufacturing processes, balancing the risks of inventory glut and shortages is especially difficult. To achieve these balances, firms have developed several methods for inventory management, including just-in-time (JIT) and materials requirement planning (MRP).
The accounting policies adopted in measuring inventories, including the cost formula used.
The total carrying amount of inventories & its classification appropriate to the enterprise.
disclosure of AS2
What is job costing? What are its main characteristics?
Characteristics
Features
procedure involve in job order costing.
Applicability
What is BEP? List out the assumption of breakeven analysis
Assumption of BEP analysis
What is Profit Volume (P/V) Ratio
What is CVP analysis? How does it help the management?
What is process costing? What are its main characteristics? Name the industries where process costing can be applied.
Normal Loss
Abnormal Loss
Abnormal Gain
Job Costing & Process Costing
Accounting for losses in process costing
What do you mean by operating costing? Draw a specimen cost sheet for transport costing.
INDUSTRY AND CORRESPONDING COST UNIT
RECONCILIATION STATEMENT
To understand the basic concepts of marginal cost and marginal costing.
To understand the difference between the Absorption costing and Marginal Costing.
To learn the practical applications of Marginal costing.
To understand Breakeven charts & Limitation
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
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This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
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Normal Labour/ Stages of Labour/ Mechanism of LabourWasim Ak
Normal labor is also termed spontaneous labor, defined as the natural physiological process through which the fetus, placenta, and membranes are expelled from the uterus through the birth canal at term (37 to 42 weeks
This presentation includes basic of PCOS their pathology and treatment and also Ayurveda correlation of PCOS and Ayurvedic line of treatment mentioned in classics.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
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3. Outcomes
• When you have completed this unit
you should be able to:
discuss the objective and scope
identify, recognise, measure, present
and disclose inventories in AFS
integrate inventories with other
statements of IFRS
4. How will you be assessed?
• Determine cost per unit (calculations)
• Determine the value of closing inventory
(calculations)
• Journals
• Present on the SFP
• Disclose in the notes to the SFP NB
5. Objective of IAS 2
• To prescribe:
• how the cost of inventory is determined
and
• which useful and understandable
information is provided in the financial
statements
7. Scope
Excludes:
Work in progress from construction
contracts (IAS 9)
Financial instruments (IAS 32;IFRS 9)
Bbiological assets (IAS 41)
Mineral and mineral products
CCommodity brokers
8. Definition
• Inventories are assets:
held for sale in the ordinary course of
business;
in the process of production for sale; or
in the form of materials or
supplies to be consumed in the production
process or in the rendering of services.
9.
10. Inventory systems
• Periodic method
Accounting for inventory done only at
Year end ,
• Perpetual method
Inventory accounts are updated per
transaction n
11. Periodic method
Example
Opening inventories R 20 000
+ Net Purchases R300 000
- Closing inventories (R 40 000)
= Cost of sales R280 000
Inventory a/c not done during the year!
Work in purchases account!
Correct position at end of reporting period
12. Perpetual method
Example:
Purchases cost price = R100
Selling price (VAT inclusive) = R171
Journals:
Dr Cost of sales R100
Cr Inventories R100
Dr Bank / Receivables R171
Cr Sales R150
Cr VAT output R 21
Update records per transaction
13.
14. Measurement of inventories
• Inventories should be measured at the
llower of:
cost and
net realisable value (NRV)
15. Steps for measurement of
Inventories
1. Determine the cost
2. Applying cost allocation technique
(FIFO ,Weighted average)
3. Determining NRV
4. Lower of cost and NRV in FS
16. Cost of inventories
• The cost of inventories should
comprise:
All costs of purchase
costs of conversion and
other costs incurred in bringing the
inventories to their present location
and condition
17. Costs of purchase
Purchase price :
• Less: trade discounts, rebates & subsidies
Excluding:
• VAT, Interest
Add:
• Import duties and other taxes (only taxes
we cannot recover from tax authorities,
VAT???)
• Transport , handling and other costs directly
attributable to the acquisition of inventories
18. Thus: Cost of inventory
Includes:
• Cost of purchases
• Import duties &
handling fees
• Exchange rate when
ownership passes
• Transport cost to
place of sale
• conversion costs
Excludes:
• Vat
• Storage costs
• Agent’s
commissions
• Selling and
marketing costs
• Administration costs
• Abnormal wastage
• Finance costs
• Borrowing costs 18
19. Example 1
AB Ltd imported 50 laptops from China
Price according to the invoice - R20 000
each unit with a 25% trade discount.
Import charges incurred:
-Freight & marine insurance 63 000
-Import duty 100 000
-Clearing agents charges 26 500
REQUIRED:
Determine the cost price of inventory
23. Cost of inventories
• The cost should comprise:
All costs of purchase
costs of conversion and
other costs incurred in bringing the
inventories to their present location
and condition
24. Cost of conversion
Typically for manufacturing:
• These are all costs incurred in
converting raw materials into finished
products ready for sale.
27. Conversion Cost
Variable Overheads
• Indirect costs of production that vary
d directly with the volume of
production such as:
Relatively labour
Example : A supervisor is paid
R5 per unit inspected
• How to allocate the cost
Allocate cost per item
28. Conversion Cost – Fixed Overheads
• Those indirect costs of production that
remain unchanged regardless of the
volume of production
Depreciation , salaries, factory
rental etc…
How to allocate the cost
• Based on normal capacity unless
inventory levels are particularly
for that period then use ACTUAL
29. Conversion Cost
• Normal Capacity vs Actual Capacity
• Normal Capacity
• IAS 2: Production expected to be achieved
on high over a number of periods under
average circumstance taking into account
normal losses
• Actual Capacity
• Actual Production that can be produced
30. Example 2
Actual units : 80 000 units
Normal capacity : 100 000 units
Actual Fixed overheads : R 100 000
Question
Given capacity utilisation what is the
allocation rate?
What happens to the unallocated portion?
For the allocation
of fixed
production o/h
34. Example 3
Normal capacity :100 000 units
Fixed overheads :R100 000
Actual production :120 000 units due to
abnormally high production
Question:
What is the allocation rate?
Prepare necessary journal entries
Abnormally
high production
therefore -
Actual
36. Normal vs Abnormal wastage
Why?
Asset definition / overstating inventories
Normal Abnormal
As part of normal production? Yes No
What happens to the “cost” of
the wastage?
Capitalise as part of
inventory
Expense through SCI
as part of Cost of
Sales
41. Other costs of inventory
• Only in highly exceptional
circumstances
All cost incurred to bring inventory
to its present location and condition
Storage costs > Wine, cheese
Borrowing costs, in long production
processes > Wine
42. Cost of inventories
• The cost should comprise:
All costs of purchase
costs of conversion and
other costs incurred in bringing
the inventories to their present
location and condition
43. Joint products
Products produced at the same
time, the costs of which are not separately
.
•Joint products (Material products)
Divide cost between products based on a
rational and consistent basis either be:
• Sales units or
• Sales amount
•Example: Full cream milk
Cream
Plain Yoghurt
44. By products
• By-products ( immaterial
products)
• Example: leather buttons from off cut
materials
Treatment:
• The By- product will not have any cost
allocated to it and will be shown at its
NRV
• subtract sales (NRV) amount
of by-products from the cost of main
45. Example 5
• Total Production Cost is R101 000
• In the production process we produced:
Gold 70kg, selling at R400 a kilo
Silver 30kg, selling at R300 a kilo
Bronze 5kg, selling at R200 a kilo (by product)
Required
Calculate the cost per metal using both the
i. Sales units and
ii. Sales value;
to divide the cost among the metals
53. Steps for measurement of
Inventories
1. Determining the cost
2. Applying cost allocation
technique (Retail, Standard Cost)
3. Determining NRV
4. Lower of cost and NRV in FS
54. STANDARD COST
• Working with expected costs
• Based on normal level of production
• Uses predetermined information
• Must approximate cost
• Must be reviewed regularly
Cost Measurement
Techniques:
55. RETAIL METHOD
• Technique used by entities not maintaining
complete records of purchases and
inventories
• Hhomogenous products with known similar
profit margins
• Should only be used if the results obtained
approximates the cost formula
Cost Measurement
Techniques:
56. Retail method continued . . .
• Inventory values are determined at the
end of the reporting period, by
• Determining the selling (value) of
inventory which is reduced by the profit
margin
• CP + GP=SP
• To determine the approximate cost
57. Retail method cont..
Cost plus method
• Cost plus 20%
• COS + GP = SALES
• 100% + 20% = 120%
GP% (Gross profit on sales)
• GP% of 20%
• COS + GP = SALES
• 80% + 20% = 100%
Want
Have
58. Example 6
Sales = R25 000
Cost of sales:
• Cost plus 25%
How much is COS?
= R25 000 x 100/125 = R20 000
• GP% of 25%
How much is COS?
= R25 000 x 75/100 = R18 750
Rx
Have
59. Cost formulas
Measure cost at the end of the year
ie Closing Inventories
• First in first out (FIFO)
Cost of first items is sold first
• Weighted average cost method
Calculate average with each purchase
• Specific identification method
Allocate cost to specific item
For bigger products
60. Cost formulas
measure cost at the end of the year
• NB: Same cost formula used for:
all inventories
with similar nature and use –
geographical location can not justify diff
formula!
• Last in first out (LIFO)
Not acceptable
61. Example 7
Bought
• 1 January:100 cricket bats for R500 each
• 1 February:150 cricket bats for R600 each
Sold
• 120 cricket bats for R1 000 each
Required
Calculate closing inventories and cost of
sales using:
i. Weighted average cost method
ii. FIFO
64. NRV vs FV less cost to sale
• NRV- entity specific amount realized
from the sale of inventories in the
of business by that entity
• FV less Cost to sell- Not entity
specific, price that would be received
to sell the same inventories in an
ordinary transaction with market
participants
65. Net realisable value (NRV)
Net realisable value is:
Estimated selling price in the ordinary
course of business R40 000
Less: estimated costs for completion (R10 000)
Less: estimated costs necessary to
make the sale (R5 000)
= Net Realisable Value R25 000
Definition
66. Why would NRV be below cost?
• inventory damaged .
• inventory wholly or partially obsolete
• selling prices have declined
• estimated cost of completion or
selling costs have increased
67. Net realisable value
• Inventories are USUALLY written down to NRV
on an item by item basis
• Sometimes, it may be more appropriate to group
similar or related items
• Based on most reliable evidence at the time the
estimate of the NRV is made
• The estimates take into account fluctuations of
price or cost directly relating to events occurring
after the end of the period, to the extent that such
events confirm conditions existing at the end of
the period – IAS 37 Provisions
• Also take into account the purpose of the
inventory
69. NRV of materials
• If NRV of material is below cost and
• If the finished goods in which they will be
incorporated are expected to be sold at prices
exceeding cost price , then
do not write them down
• If the cost of the finished goods will exceed
NRV of the finished goods, then
write down the value of the materials to
NRV
REMEMBER SIMMILAR TREATMENT???
70. NRV - reversal of situation
• NRV is assessed at the end of every
reporting period
• expense FF in the period of occurrence:
• amount of Inv write-down to NRV
• all losses of inventories
• If situation turns around, and
• NRV is higher than cost again,
• amount of write down is reversed ,
• reversal is limited to amount of original
write down
71. Example 8
Furniture Shop:
Damaged desk cost R2 500
Other similar desks selling price R3 800
Cost to repair desk R1 500
NRV of desk (R3 800-R1500) R2 300
Thus NRV lower than cost (R2300 < R2500)
Dr Cost of Sales 200
Cr Inventory 200
All write-downs to NRV, as well a write back up
to cost are included in Cost of Sales as an
inventory expense
72. Presentation
• Inventories
On the face of statement of financial
position: as current asset
• Cost of sales
On face of the statement of
comprehensive income
73. Disclosure
Accounting policy
• Measurement base (Lower of cost and NRV
) of inventories (including cost formula e.g.
FIFO, Weighted average)
Statement of comprehensive income
• inventory items sold
• Amounts written down to NRV
• Over/under recovery
• Abnormal cost
74. Disclosure
Statement of Financial position
• The carrying amount in main classifications
• Finished goods
• Materials
• Consumables
• Work in progress
Total inventories
• Carrying amount of inventories carried at NRV
• The amount of any reversal of a NRV write-down that
caused us to have a reduction in Cost of Sales
(credit)
• The circumstances that led to the reversal above
• The carrying amount of inventories pledged as
security for liabilities
75. Road map Where to go from here…
• Class notes
• Chapter 3 Introduction to IFRS
• IFRS Applications
• IAS 2 Summary
• Questions:
• Pre-read: Unit 2 - Provisions, Contingent
liabilities and contingent assets