Question

1. The inventory balance of Gidimadjor Ltd are as follows for the year ended March 31, 2017

GH¢000

Opening Inventory	28,875
Closing Inventory	31,425

In the course of preparing the financial statements at March 31, 2017, the need for a number of adjustments emerged as stated below:

1. The opening inventory was found to have been overstated by GH¢3,135,000 as a result of error in the calculation of values in the inventory sheets.
2. Some items included in the closing inventory at the cost of GH¢120,000 were found to be defective and were sold after the end of the reporting period for GH¢78,000. Selling cost amounted to GH¢4,500.

Required:

Discuss the above transaction in accordance to IAS 8; Accounting policies, changes in accounting estimates and correction of errors.                                                                                   

Answer 1

As per IAS 8

Changes in accountng policies and accountng errors have to be retrospectively adjusted.

Changea in accounting estimate are to be accounted prospectively.

In case i

The opening inventory was overstated, it means previous year closing stick was overstated. So entity needs to retrospectivele adjust the figure of closing stock in the comparative financial statements for previous year.

case ii

This is realtes with IAS10, Evnets after reporting period,

If the financial statements are not approved till the date of finding defects , the entity nees to revalue its closing inventory to the lower of cost or nrv , here nrv is lower.

It nees not be treated as an accounting error as per IAS8

answered by: anonymous