Who from IES deleted IAS

IFRIC update published

Net Realisable Value - Costs Necessary to Sell Inventories (IAS 2)

According to IAS 2.9, inventories are to be valued at the lower of acquisition or production costs and net realizable value. The net realizable value is the estimated sales proceeds that can be achieved in the ordinary course of business less the estimated costs up to completion and less the estimated necessary distribution costs (IAS 2.6). The IFRIC has now dealt with the question of whether the estimated necessary distribution costs are limited to the incremental costs.

Incremental costs are those costs that are only incurred because a specific, individual sales transaction is carried out. The committee found that a limitation to incremental costs by the regulations of IAS 2 Not is covered, as this may exclude costs that the company has to incur to sell its inventories, but which are not caused solely by a single sales transaction, but can be allocated to several sales transactions, for example. The inclusion of only the incremental costs could therefore fail to achieve the aim of a devaluation to the net realizable value set out in IAS 2.28.

The IFRIC noted that in estimating the cost of selling a company in the ordinary course of business, an entity should take into account specific facts and circumstances, including the nature of its inventories.

In the opinion of the IFRIC, the principles and requirements in the IFRS standards provide an adequate basis for an entity to determine whether the estimated costs necessary for the sale are limited to the incremental costs in determining the net realizable value of inventories . As a result, the IFRIC proposed in its preliminary agenda decision not to include a standard setting project in the work plan. The 60-day comment period for the preliminary decision ends in mid-April.

In addition, another provisional agenda decision was made, which relates to the presentation of the previous year's figures when the going concern premise was abandoned. The agenda item in relation to a sale and lease back transaction in the form of a company sale of a subsidiary that only holds a property and leasing of this property to the seller will be discussed by the IASB at a future board meeting, taking into account the recommendations of the IFRIC.

The complete IFRIC Update Newsletter is available on the IASB website under the following link.