CAS-25: Valuation of Inventory

• What counts as inventory, and ownership (§§4, 5.1)
• Cost, exclusions and cost formulae (§§5.5, 5.15, 5.16)
• Lower of cost and NRV, item by item (§5.17)
• Non-moving stock and bank stock statements (§§4.10, 4.16, 8.6)

Chapters

1. The stock count · Count only what Selvi owns, and value it at cost (§§4, 5.1–5.5, 5.15, 5.16)
2. The khaki nobody wants · Write stock down to what it will really fetch (§§4.10, 4.16, 5.17, 8.1, 8.6)
3. Spot the mistakes in the bank’s stock statement · Last challenge of Stage 8 (§§5.1, 5.15, 5.17)

Key terms

• Inventory and its cost (§§4, 5.1–5.5, 5.15, 5.16): Inventory is what the business owns and holds for sale, in production, or as materials. Its cost covers buying, making (fixed costs on normal capacity) and bringing it to where and how it is now. Unusual costs, storage not needed for production, selling costs and office costs not tied to production stay out.
• Net realisable value and stock that isn’t moving (§§4.10, 4.16, 5.17, 8.1, 8.6): Inventory is held at the lower of cost and what it will fetch, item by item. Non-moving stock has not moved for a long time; slow-moving stock moves well below normal. Disclose the policy, important items, and why the stock statement given to the bank differs from the cost records.