![]() ![]() Instead, these items are generally treated as property, plant and equipment.As we draw closer to the end of the New Zealand financial year and you start to think about preparing year-end accounts, it is important to consider whether the various tax measures the New Zealand Government has rolled out to assist business owners respond to the challenges presented by COVID-19, could apply to your business and, if they do, how they apply. Packaging or parts that are sold to a customer but will be returned to the seller for re-use are not inventory if they will be used over more than one period. Īre reusable and returnable packaging and parts inventory items?Īs part of its strategy on climate-related matters, a company may decide to move to using reusable or returnable packaging or parts – e.g. If these allowances are held as a commodity for resale, then they are measured at their fair value less costs to sell. In our view, emissions allowances may be classified as commodities and, therefore, may meet the broker-trader exemption included in IAS 2. Conversely, if it purchases emissions allowances from a third party and accounts for them as inventories, then it applies IAS 2 from initial recognition. If the company accounts for emissions allowances as inventories, then it subsequently applies the measurement requirements of IAS 2. Initially, a non-monetary government grant may be recognised either at fair value or at a nominal amount. If a company receives emissions allowances from a government, then it may apply the guidance in IAS 20 Accounting for Government Grants and Disclosure of Government Assistance on initial recognition. As inventories: Under this approach, emissions allowances are considered to be an input in the production process, similar to inventories.Therefore, they meet the definition of an intangible asset. As intangible assets: Under this approach, emissions allowances are considered to be identifiable non-monetary assets that have no physical substance.In our view, a participant in a cap and trade scheme should choose an accounting policy for its emissions allowances based on one of the following approaches and apply it consistently. a regulator – to allow it to emit pollutants legally. These schemes require a company to deliver emissions certificates to a third party – e.g. Īre emissions certificates an inventory item?Ĭertain jurisdictions operate a ‘cap and trade’ scheme. Also, if these costs are significant, then actual production costs on the earlier units produced may exceed the NRV of these units and, therefore, result in losses on initial production. In our view, these costs should be included in the cost of inventory (subject to their recoverability) when there is clear and objective evidence that these costs are not abnormal costs. In some cases, a company may incur costs as part of its learning curve in setting up a new production line. This means that if a production line is operating at below its capacity, then some costs may need to be written off to profit or loss in the period when they are incurred. In addition, fixed overheads are allocated based on normal operating capacity. Any abnormal additional production costs are expensed when they are incurred – e.g. When a company starts to manufacture a new product or makes significant changes to its production processes, the associated costs may be higher initially as the company builds its experience. Selling and advertising costs are excluded from the cost of inventory. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Companies may also make changes to existing production processes to comply with new laws on climate-related matters. What is the cost of a new item of inventory?Ĭompanies may introduce new, more sustainable products either to meet consumer demand or to replace current products that are no longer economic to produce. Therefore, management needs to consider these carefully when determining the NRV of its inventories. Ĭlimate-related matters could impact both the selling price and the cost of an inventory item. NRV is the estimated selling price in the ordinary course of business less the estimated costs of completion and sale. Any write-down of inventories to NRV is recognised as an expense in the period in which the write-down occurs. Under IAS 2 Inventories, inventory is measured at the lower of cost and net realisable value (NRV). Do inventory items need to be written down to net realisable value? ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |