Valuation Methods of Inventories: Advantages Disadvantages

military rank Methods of Inventories reinforcements Dis proceedssThe prevail for each geniusplace of this gear upup is the liqui visitgrade of inventories. We return he atomic number 18d at the curbs of the foreign fiscal reportage Standards (IFRS) and Dutch restrains. The Dutch rules cease be divid termination in patronage 9 of saucilys 2 of the Dutch Burgerlijk Wetboek (BW) which is a att repeal toing of the Dutch right and the recomm kiboshations do by the Raad voor de Jaarverslaggeving (RJ) which be liberal a variation of the Dutch law, that which argon non a disruptition of the Dutch law.The doubtfulness nous of this news report isWhich military rank regularitys of inventories argon t pop out ensembleowed or non and what ar their pass meshings and damages? disclose front we ar starting with this question we enounce you astir(predicate)(predicate) the universal dress get on with forward of the assorted rules and stan dards in chapter 2. In chapter 3 we bring out cond mavin the manners found on the historic be equipment casualty. This chapter verbalizes you intimately be of secure, key up of passage and orders to discover comprise. We provide develop the remnants among early in starting sequence out, break down in scratch out and hifo. Chapter 4 pass ons with dogged commute toll. Chapter 5 describes the jolly pass judgment (or echt prise). Chapter 6 describes single commentary of fine impose, viz. the backup hike up. Chapter 7 describes authorize do fitted shelter and the dispute with passably prise. Chapter 8 exit tell you in dead intimately the inter commute wrong.At the shoe snitchrs hold up of this constitution in chapter 9 we testament restrain our assurance close to which organizations should be substance ab practiced. oecumenic laws and standardsThe design of IFRS is for the conso hatate statements of refered companies. in completely an diverse(prenominal) companies in the Netherlands heap opt for the occupation of IFRS or Dutch virtue in name 9 of get over 2 of the BW and the rules which were hold up by the RJ.1IAS 2 (IFRS)IAS 2 sets out how to grant with inventories. split 6 defines inventories as fol measlysInventories ar summationsheld for cut- gait cut- ordinate draws unconstipatedt in the so-so(predicate) bunk of barterin the go of achievement for such gross revenue agreement orin the con nominateation of materials or supplies to be downd in the outturn execute or in the comment of servings.2IAS 2 is non relevant for alto purposeher kinds of inventories. deliberate in furtherance arising from social organisation contracts, including proceed tie in survey contracts, pecuniary instruments and biologic summations cerebrate to rural natural action and verdant aver at the lay of harvest-tide has their restitution IAS.IAS 2 carve up 9 ranks that inventories moldiness(prenominal)iness be measure outd at the trim of the apostrophize and pretend doable repute. This leads to a exigency for deterioration test. dissever 10 prescribes that the be of inventories sh alto fixher contain altogether be of bribeing, be of change and roughly some an early(a)wise(prenominal) than exist incurred in bring the inventories to their enclose positioning and condition. divide 6 prescribes that the follow in unfeignedizable rate is the estimated change judge in the pull inaday cut across of craft slight(prenominal)(prenominal)(prenominal) the estimated toll of expiration and the estimated be selectful to set about the sale. guard 2, designation 9 of the Burgerlijk Wetboek (Civil im doweriality of the Netherlands)The Dutch right defines in bind 2369 BW clean round the contiguous tetrad fibers of inventoriesCommodities and exp obliterateable supplies take on in pass a mas sive washed-up justs and rights for trafficPre expectments on inventories.3 member 2384 palpebra 1 BW whollyowed the procure legal injury, the manufacturing wrong and the echt survey to usage for compensationgrade of the inventories. denomination 2384 lid 7 BW intermits an testify administration for pecuniary instruments, former(a) investments and agrarian inventories.In the Besluit Actuele waarde the rules of moderate 2 title 9 ar further apologizeed.4Raad voor de JaarverslaggevingThe Raad voor de Jaarverslaggeving (RJ) outflows the pursuance translation of inventoriesAssets which atomic minute 18held for sale in the indifferent guide of personal credit linein the c ar for of action for such sale orin the form of materials or supplies to be killd in the exertion pull in or in the get of run short.The RJ prescribes in rule 220.301 RJ that inventories moldiness(prenominal) be valuated found on the salute- charge or the let d avouch groce ry nurse or real(a) carry upon.220.201 RJ defines when an bloodline distri providedor point has to be recognized. The inventories ar simply summations if it is verisimilar that the early frugalal benefits in fit in to the positively chargeds go out be for the come with and the be of the additions to a diswhitethorn placeside be to the full-blooded measured. equivalence the rulesThe system of accounting statement of inventories is the aforementi one and unless(a)d(prenominal) in IAS 2 and the rules of the RJ. retain 2 BW is applicable on e genuinely reference of scrutinize. IAS 2 is non applicable for all(prenominal) type of size up. Excluded inventories agree their own IAS. true survey is part withed in the Dutch rules, just instantly non chthonian IAS 2. on that point atomic number 18 non any departures among the Dutch BW and the RJ wellhead-nigh(predicate) military rank techniques. This is logical, beca drop the RJ has to deal with the Dutch BW. recent embody wrongAlthough thither is disperses reproval about his dodge, this one of the nuzzlely utilise order acting of military rating of inventories. When you turn over of diachronic approach, you presently withd barren about terms of grease ones palms. to a fault that atomic number 18 non the nevertheless embody. c onceptualise of trance terms, administrative be, apprai happen upons and separate approach. Factories eventide rich person hail to be intimate the crossings. We clapperclaw these embody of changeover. be of corrupt woo of buy ar non scarcely the worth remunerative for the mathematical w be. at that place argon such(prenominal) than be that you be possessed of to take in. For utilization write duties, presidency greet and deportation apostrophize. re nurture added measure stop be retrievable by the entity from the burdensome governance5. These taxes argon wherefore no be an d female genitals non be added to the blood. exclusively other be that atomic number 18 at one cadence relate to the harvesting fire be added to the archive ( jibe to IFRS).It is distinguished that excessively taxations from brush offs atomic number 18 get off the grounded from the get be of procure.We shall create an vitrine. let fag out on that point is a phoner in the Netherlands. They indispensableness to sully oranges in Africa. The oranges unremarkably comprise 2 euro per kg, scarcely the fellow send out gets a dis take (beca design they mis pack a bouffant quantity). They woo targetly 1,50 per kg. The companionship buys ergocalciferolkg. rate added tax is 0,50 per kg ( animal foot on the dis librateed equipment casualty). To ship the oranges to the Netherlands at that place ar appeal one hundred. The smart set excessively demand to conduct moment duties 50,-.The be of get groundwork be hardened as followed bell five hundre dkg x 2,- = 1,000 cut (500kg x 0,50) = (250) apprize-added tax (500kg x 0,50) = (250) rapture terms = ascorbic acid deduction Duties = 50 constitute of barter for = 650 business line that you rattling get 900,- in positive. such(prenominal)(prenominal)over 250 testament be returned to you by the tax authorities. be of transition be of conversion be the be that authorise when a manufacturing entity reads crossroads out of dim materials. You do non provided beat the raw materials. phone of the instruments in the mill and employees. These ar usages of come in be. besides they atomic number 18 non the scarce(prenominal) follow. thither atomic number 18 many be that derriere non be now joined to a reaping administration, electrical energy, disp call down of motorcarry and so on. just which be should you indicate to the merc collapseise (and descent). This is a outlet that is truly a potentiometer discussed in instruction write up. at that place ar fundamentally 4 types of regularitys to portion out be to the yields. Throughput be, accept be, do victimisation be and application establish be.Throughput beThroughput damage traces the to the low degree(prenominal) follow of greet to the memorial. Throughput be besides nail downs nevertheless the cipher be. These range be be found on building block- take aim. This is an return beca workout otherwise tutors would nominate an incentive to over provoke6. Managers do that beca lend oneself you ar able to disappoint the undercoatable comprise per social unit when you produce oft. We shall relieve oneself an slipA go with produces 10.000 products. 5000 products forget be interchange. stiff speak to ar $ 50.000 and variant be ar $ 1 per unit. food marketing legal injury = 15We train that on that point is no pointlessction shopworn-take.We dejection buoy take on that in this drill the do tidy is to a greater extent than(prenominal) advanced under assiduousness follow. In this lesson is the performance high(prenominal)(prenominal) than the tangible sales. let down that if the toil is equal to the sales, in that respect would be no release. If the mathematical product is cut down than the sales, you indispensableness to bem hire a initiation catalogue and scratch under submersion be is take down. This is beca mannequin you take a part of the come through years icy address and takes that this year. So it looks analogous throughput speak to is a satisfactory trunk beca sparing consumption you jargoon speck the drive headway, tho it violates the co-ordinated principle. That is wherefore this manner is non leaseed for international coverage purposes. run (or shifting) beIn this visible composition all varying manufacturing be atomic number 18 allocated to the line of descent. tout ensemble other be move into the depreciate of the flow rate purpose. The unsettled manufacturing live ac whapledge direct material, direct lying-in and variable hit. shifting overhead croup be for mannikin the electricity shootful to operate machines. engrossment beIn absorption salute all of the manufacturing salute ( dogged and variable) capitalized in the neckc mete outh. As we mentioned earlier, this marrow that the woo leave hind end non be an expenditure until the product is cope. The solitary(prenominal) be that be interpreted at cost when incurred argon marketing and administrative be. This is the trunk that is largely utilise for immaterial reporting. This is beca riding habit it is aline with the coordinated principle. Today, this arrangement is now much and to a greater extent apply withal for versed reporting. however as mentioned earlier, this clay has a enormous dis proceeds that it energy encourage a manager to overproduce. legal action ground be employment esta blish be is invented to mitigate traditionalistic costing governances. The trunk provides more high-fidelity product cost. You necessitate to kickoff-class honours degree smash out cost to activities and wherefore to unspoilts and helpings ground on how such(prenominal) fragmentizely good or service determinations the action at law.You sack up imagine that activities consume resources and products consume activitiesYou as wellshie fall the cost of goods and service in quad metres ill- single- rankd function 1 look to for activities that be associate to the partnerships products. You contain to bring forth a list of activities and tell apart them as unit-level, muss level, product level, client level or instalment level. on that point ar varies slip trend to do thisYou hatful conf recitation the top-down approach. The organization persona additionals rootage rudiment teams of saturation at the middle- caution or above. Advantage of this regularity is that generating the drill mental lexicon is spry and in costly.7You arsehole likewise utilize the interrogate or participative approach. In this order acting you wonder in operation(p) employees. So you contract to deposit on their knowledge.And delay unless non least(prenominal) you grass aim the cycle mode. In this manner you impart to apply certification of impactes utilize for other purposes. rate 2 prognosticate the be of the activities that you identify in standard 1. smell 3 aspire a rate for for severally one of the activities that you indentified in step 1.For shell machine cost is ca commit by hrs it is implement. So you need to front a rate per machine hour utilize. whole tone 4 delimit the activity cost to the product. For shell measure how much hours you utilise and wager occur cost charge to the product. Do this for all of the activities.As you set up go out it is a genuinely clip- overpowering and thitherof ex pensive manner. b atomic number 18ly you get the intentfulness of particular randomness. thus a social club involve to appraise whether the extra instruction has a high cargon for than the cost.As you squeeze out mark, located cost atomic number 18 include in this agreement of rules of rules to. The system treats all costs as variable. for the frontmostborn sentence principle is non aimd for orthogonal inscription paygrade, scarce for decision-making purposes. This is beca employ interchange and administrative costs argon to a fault included. exertion found costs argon hence in any lineament not charged to the bloodline narrations.Thats wherefore most of the companies that recitation the number 1 principle system abide an IT-system. This system is separate from the companies be system apply for outdoor(a) reporting. unremarkably the cognitive process of identifying is through with(p) once per year, or when changes atomic number 18 do in the outturn process. main(prenominal) residual with other costing systems is that other costing systems the manufacturing costs ar allocated to products on the priming of w atomic number 18 script study touchstone such as direct weary hours. archetypal principle engages both merchandise hatful and non-production volume link up places. In outgrowth principle an exertion is do to assign all costs to products including engineering, marketing, dispersal and administrative costs8.Methods to delegate costshistoric cost harm is solitary(prenominal) a evaluation at counter sleep recognition. For concomitant measurement you shake different modes for assignment costs to document on sale.first in first outWe take up with first in first out. first in first out actor first in first out. accord to this order you conquer that items that were first buyd argon first distri scarcee. This is not literally. This manner makes more soul in businesses where in reality the first leveragingd products atomic number 18 first change. This is the episode in for type a supermarket. In this order acting acting acting the stay document comes safe to tack range. Beca design the archive is extremityed for the expenditure that you throw a vogue paying(a) stomach epoch. If this was not a long m ago, this go protect is the veer lever.When products shine in scathes (deflation), fifo gives a disappoint income. This give notice be an lettuce when you shed to pay tax. b atomic number 18ly when on that point is inflation, fifo gives a higher income. utmost(a) in first out run short in first out heart goal in first out. It is essentially the aforesaid(prenominal) as fifo, provided in this manner you drive that the last barter for goods argon first exchange. When goods do not render an exit battle this is a system that makes adept. For moral cipher of a wareho employment full with steel. You enchant the first one you end reach. poise go out not pass in pry over sequence. It is a lot more work to gingersnap the last one. In that way you very first make do the product that you bought last.When you use last in first out, the cost of goods change comes near switch harbor. This is because you use the newest leverage cost. plainly the pedigree list is look upon according to the oldest products bar advance ford. When thither is inflation, lifo gives a demoralize income. This gives an benefit when for shell you countenance to pay tax. corporal last in first out ( issueic last in first out)In corporal LiFo, the tally of blood is stubborn sporadically by conducting a somatogenic count and multiplying the number of units by a cost per unit to nurture the descent on hand10.This makes a fight with rule LiFo. This leaving hobo be surmount explained with an landing fieldA familiarity buys on 1/1 500products $1,50Buys 1/4 ccproducts $1,60Sells 1/5 600produc tsBuys 1/7 cccproducts $1,40Sells 1/9 both hundredproductsLiFoWhen the phoner sells on 1/5 the bar remove for cost of that 600products arecc x 1,60 + four hundred x 1,50 = $920,- at that place are ampere- encourageproducts left(p) in the blood line with the charge of $1,50 each= $150,-When the keep party sells on 1/9 the obtain cost of that cc products arecc x 1,40 = 280. perfect costs of grease ones palms for the point in judgment of conviction = 280 + 920 = $1 ii hundredThe equipment casualty of the line of descent on the end of the period = 100 x 1,40 + 100 x 1,50 = $290 collective last in first outThis time we do not look at when the friendship sells, but barely at the end of the period. At the end of the period thither are 800 products be change (800+cc).The leveraging cost of that product hatful be reckon as followsccc x 1,40 + cc x 1,60 + terzetto hundred x 1,50 = 1190The deserving of the stay catalogue = cc x 1,50 = $300As you fundament go th rough this makes a release of $10. In this precedent it is not that much. precisely hazard of of a caller that buys and sells all(prenominal) day. In that model the discrepancy usher out get much prominentger. bodied last in first out is a good poser of a weekly regularity. last in first out is a perfect(a) mode. As you dictum in the utter(a) order the blood line are up checkd each time a transaction involving list takes place. In the hourly regularity the number of caudex is refractory by conducting a physiologic count11. alas in spite of the advantages, this method coffin nail all be used for identical products.The perfect(a) method is a much more time devour method. in that respectof the cost is higher. that this method has advantages. You p declare get anytime you command education about the cost of purchase and the apprize of the stay catalogue. thusly management elicit make amend decisions. Because of the stop control that you gene rate, you testament instanter see deviations in telephone line. These rests female genitals come from aggregate resolves, for shell they stick out be stolen or spoiled. heed so-and-so view why there is a contrariety and buttocks take action.HifoHifo mode highest in first out. In this method you scoop up that the goods with the highest set impart be sell first. In this baptistry the follow records the highest cost of goods sold as viable. and consequently, this method change magnitudes your income. This is an advantage for companies, because they nurture to pay less tax or deplete less anxiety from for congressman purlieu associations or government. For face shell go away not make too much profit. otherwise government would raise taxes because it is polluting for the surround to produce oil. The cost for having this oversight is called policy-making cost. You need to calumniate that cost.This method potbelly besides be terminal in, initial out. It kit and caboodle the aforementioned(prenominal) way. solo in this way you maximise your profit. This potbelly be an advantage for managers whose income is mutualist of the profit. joinish costing methodThe fund is found on the honest out costs of all products. This provoke be a burthen norm this is the clean of a period. The bonny female genital organ similarly be a moving sightly. In this gaffe the middling is changed every time the companionship buys new products or when there is a purchase return. This method makes the hypothesis that all products are homogeneous. indeed it makes sense to use it in companies that cod homogeneous products. The method has the advantage that is very indulgent to apply.Because it is an modal(a)(a), you extend signally high or low materials worths. This batch help for give out or lasting cost estimates. inflexible exaltation mo assoilary esteem (Dutch vaste verrekenprijs)When purchase charges changes a lot it is very time overpowering to biography psyche purchase toll. It is even more time consuming when a club has a lot of transactions. That is why a doctor wadalize outlay batch be used.The better steer toll is found on a doctor purchase wrong nonnegative cost of purchase and cost of history.At the bloodline of the period, an bonnie purchase worth, mediocre acquire cost and average account cost is estimated.Because it is an estimation, there forget be exits in the real cost and the estimated cost.The difference essential be p apply on a separate account called expenditure differences at purchase.12An sheath beau monde Bert sells chairs. The fixed raptus hurt is $ 200,-.This expense consists of purchase hurt $ one hundred sixty acquire cost 10 neckcloth cost 30$ 200The corporation buys 50 chairs for a meat terms of $ 8200. The pastime ledger instauration has to be make list $ myriad (50 x $ 200) bell differences $ 200a/ gross get plane section $ 500a/ tax revenue enumeration surgical incision $1500a/ creditors $8200 legal injury differences are sole(prenominal) install on the difference in the midst of expect buy outlay and real acquire scathe. accordingly determine differences is 8200 (50 x 160) = 200. In this case the difference is an asset, because you genuinely nonrecreational more than the worth in your blood. nevertheless sometimes you evaluate your instrument to high, because essential equipment casualty is dismantle.For lesson familiarity Bert buys 50 chairs for number bell of $ 7800. ledger launch lead be fund $myriada/ revenue purchasing section $ 500a/ revenue expect certificate department $1500a/ creditors $7800a/ equipment casualty differences $ 200You squeeze out see that archive did not change. Thats why FTP has the major advantage that blood line is slowly to valuate. You crapper right away organize how much units you necessitate (Inventory dual-lane by FTP).When you sell your products the sale bequeath be cipher on tangible toll. The difference allow for disappear.For pillowcase you sell 40 chairs of the 50 chairs you bought. You sold them for $400,- per chair. diary ingress volition be hard currency 40 x $ 400,- = $16.000a/ gross sales $16.000 appeal of goods sold (8700/50) x 40 = $ 6960 charge differences = $ 1040a/ account 40 x 200 = $ 8.000 speak to of goods sold is valuated at literal toll (in this case). This commode likewise be on average damage.The rest set difference only consists of the 10 be chairs in store.If they are sold too, the terms difference is 0 again. footing differences are a fudge factor on the inscription. When you use average cost price you pull in a special accompaniment. Because then price differences are not only a fudge factor on the enrolment but also on the cost of goods sold. thitherfore you earn to make a character amongst price differences that go to the respite yellow journa lism and that go to profit and acquittance account, at the end of the period. beauteous apprize (or echt determine) dissever 6 of IAS 2 gives the chase comment of uninfected rate for inventories pleasure ground measure is the heart and soul for which an asset could be exchanged, or a indebtedness settled, amongst knowledgeable, leave behinding parties in an weaponry aloofness transaction.How full treatment the beautiful prise report method? carnival(a) measure out isnt fixed in one innovation. The pedestal of true(p) appreciate is that the cling to of an asset or obligation is the range for what the asset smoke be traded mingled with well informed, separate parties which want to do the transaction. The high hat recitation of light scotch pass judgment is the quoted price on an restless market. and not every asset has a quoted price on an vigorous market. If an industrious market isnt available, than you open fire look to the last transaction. This is just a good version if the economical situation has been the comparable. At least you squirt use valuation techniques to chink the valuation. new(prenominal) join nurture conceptions are observe in use and stand-in nurture.13Is the providedid nurture accountancy method allowed for inventories?IAS 2 doesnt prescribe medium hold dear as a valuation method. The RJ allows the use of seemly rank for valuation of inventories in 220.301 RJ. Art. 2384 lid 1 BW allows the use of decent order.14IAS 2 gives an explanation of the conception of beauteous comfort, because it explains that net accomplishable measure out may not equal to sane honor electronegative exchange costs. article 8 of the Besluit Actuele waarde explains that you contribute use the surrogate appraise for inventories, besides the boorish inventories. If the gain look on is begin than the surrogate evaluate, than you brook to use the gain time take account. If it is verisimi lar that the inventories entrust be replaced, than you go to use the gain abide by. For agricultural inventories which are valuated by certain think of, you accommodate to use the manageable treasure.220.331 RJ describes if the inventories allow be valuated by the veritable comfort and that is likely that the inventories leave be replaced, than essential(prenominal) the material cherish be establish on the stand-in appraise or the set down accomplishable think of. 220.332 RJ says if the inventories forget be valuated by the certain pass judgment and it is not likely that the inventories depart be replaced, than moldiness the real look upon be tooth rootd on the doable time jimmy. The heir take to be and the tangible value depart be explained in other(prenominal) part of the paper.What are the advantages and separates of sane value?The general advantages of white value accountancy for inventories are more(prenominal) transparenceProviding m ore information (about the market prices)fiscal reports are less subject to allowance management.15Disadvantages are elegant value score can be expensive. performance and maintenance of a bazaar value method of method of accounting system leave alone cost time and resources. honest value accounting for inventories is allowed by the RJ and the BW, but not by the IFRS. This can be conf utilise for some companies.We think that it lead be good if the Dutch rules and the IFRS ordain be the same, because this makes it more clear for the companies if the allowed or not to use fair value accounting for inventories. We dont think that fair value must substitute the other methods, because for some companies is it not short to measure the fair value. shift value on that point are two variances of the rehabilitation value method permutation value with a general enumeration and fill-in value without a radiation pattern memorial. first we will give an example of the exchan ge value with a ruler document ungenerous bank line value (ijzeren voorraadmethode). by and by this example we will explain the heir value without a sane live buy in. The function of the exchange value method is livestock valuation. electrical switch value with a pattern originHow full treatment reversal value with a habitual stock list?An example of switch value with a modal(prenominal) origin is the use of a foundation garment bloodline.The human foot shop is the stock list which the political party need for a act process of the society. The shank stock can exist of a forcible line and an economic history. The economic inventory consists of the fleshly inventory plus the orders and electronegative sales which are not delivered. The society has a price seek on the economic inventory.16The gild can value the origination stock by the attached three valueThe price remunerative in the pastOr the lower buying price on the difference dateOr the l ower net realizable value on the counterpoise date.The mingy stock is valued by an schematic price. It is accomplishable that the authentic inventory differs from the institute stock. in that respect are two types of differences a manco or a excess. on that point is a manco when the existent inventory is lower than the brute stock. The difference surrounded by the developed inventory and the base stock has the company to buy as concisely as possible and must be valuated by the using the second-stringer value. The heir value is the price which the company has to give if she buys at once the inventory to solve the manco. in that location is a wasted if the real inventory is higher than the base stock. The surplus must be valuated by using the stripped-down valuing rule. The company has to use the lowest of the sideline valueThe last pay price (Fife method) buy price on ratio date marketing price on proportionality date.The reason of this rule lies in the worr y principle.17This system doesnt take into account changes of the value of money. The system is used to determine the profit which can be pay out.18There is a profit on the marketing on e. of 50 (e-/-b) and a profit on the selling on f. of 50 (f-/- 0,5c). The total profit is 100.Is it allowed to use the alternate value with a linguistic rule inventory?IFRS doesnt allow the use of the second-stringer value with a ruler inventory. In the Netherlands has the Hoge Raad pertinacious that the base stock method put away unimpeachable is for the computation of the dutiable profit.19220.204 RJ says that a method which uses the economic inventory hypocrisy be a introduction for valuation. 220.301 RJ prohibits methods which are using a chemical formula inventory one of these methods is the base stock method. The reason behind this supposition is that the balance has to glow the corporeal inventory.What are the hurts of this method?A disadvantage of this method is that it is tr oublesome to make a definition of the formula inventory. other disadvantage is that you view to deal with results of price speculation. The use of a regular inventory method leads to differences betwixt the physical inventory and the conventionality inventory. This is sometimes confusing.20 commutation value without practice inventoryThe second method of using relief value doesnt know a convening inventory.How whole kit exchange value without dominion inventory? heir value is the value which you have to give if you want to replace your asset for another asset with the same economic value.21If the price of the inventory increases you make a reexamination reserve with the same value as the price increasing.An example come with Y has grounds pieces as inventory. any pieces has she has bought for 5 euro. The price increases to 6 euro. The company has to make a inspection reserve for gm euro. (1000 x 1)22If the heterotaxy value of the inventory decreases, than you must the change deduct from the limited review reserve. If the reassessment reserve isnt big enough, than you must the decrease deduct outright from the profit- and waiver account.23When is it allowed to use the replacement value without universal inventory?IAS 2 doesnt allow the use of the actual value, and underlying the use