11-02-2003, 08:11 AM
"Suppose I had 1000 M.Tons stock of F.G. and up to the date of initial of accounts i have made 5000 M.tons Sales. (which means my stock has wiped out0"
Hi Raza!
The above statement is pretty confusing! You had 1000 M. Tons of stock at what time? Start of the period or end of the accounting period? If your stock at end of the period is wiped out, how the problem of valuation at balance sheet arises? You don't have any stock!!
Any way i assume you have stock at the date of balane sheet. Here the basic principle of reporting comes into play. Balance Sheet always represent the financial position of the company <b> at a particular date</b>. Therefore, you should use the NRV at the balance sheet date. If no sales occured at the balance sheet date, then the most recent NRV to balance sheet date.
Remember IAS 2 state that if the cost is higher than NRV (Which is defined as price obtained in ordinary course of business less cost of completion (in your case you said selling costs are not an issue). Therefore, if this is the case, a reduction to NRV need to be done and the difference is recognized as expense in the period the reduction occured.
Conclusion Your auditor is smart and guess what he is right too!
Take care
<b></b>
Edited by - Pervez on Nov 02 2003 031447 AM
Edited by - Pervez on Nov 02 2003 032324 AM
Hi Raza!
The above statement is pretty confusing! You had 1000 M. Tons of stock at what time? Start of the period or end of the accounting period? If your stock at end of the period is wiped out, how the problem of valuation at balance sheet arises? You don't have any stock!!
Any way i assume you have stock at the date of balane sheet. Here the basic principle of reporting comes into play. Balance Sheet always represent the financial position of the company <b> at a particular date</b>. Therefore, you should use the NRV at the balance sheet date. If no sales occured at the balance sheet date, then the most recent NRV to balance sheet date.
Remember IAS 2 state that if the cost is higher than NRV (Which is defined as price obtained in ordinary course of business less cost of completion (in your case you said selling costs are not an issue). Therefore, if this is the case, a reduction to NRV need to be done and the difference is recognized as expense in the period the reduction occured.
Conclusion Your auditor is smart and guess what he is right too!
Take care
<b></b>
Edited by - Pervez on Nov 02 2003 031447 AM
Edited by - Pervez on Nov 02 2003 032324 AM
