Question

You are required to conduct research (i. e. reviewing relevant accounting standards and policies as well as academic and professional journals), and discuss regulatory requirements and various factors that accountants should consider when setting up accounting policy relating to inventory for the entities they work for?

Answer 1

1) duralbitiy of goods

2) demand patterns

3) length of product cycle

4) storage facilites

5) carrying costs

6) capital requirments

7) risk due to possible shortage / price increases /price reducion/ change is taste

the accounting policy once selected shoudl be followed conisitently

change is permitted if law provides so or it results in better presentation of fianncial statmeents

accounting policy shoudll be applied to all same events, transactions and cirumstance for similary transactions , different policy can be applied if satifisy the conditions of ifrs