Acme Enterprises, a hypothetical company, manufactures computers and prepares itsfinancial statements in accordance with IFRS. In 2008, the cost of ending inventory was€5.2 million but its net realizable value was €4.9 million. Th e current replacement costof the inventory is €4.7 million. Th is figure exceeds the net realizable value less a normalprofit margin. In 2009, the net realizable value of Acme’s inventory was €0.5 milliongreater than the carrying amount.1. What was the eff ect of the write-down on Acme’s 2008 financial statements? Whatwas the eff ect of the recovery on Acme’s 2009 financial statements?2. Under U.S. GAAP, what would be the eff ects of the write-down on Acme’s 2008financial statements and of the recovery on Acme’s 2009 financial statements?3. What would be the eff ect of the recovery on Acme’s 2009 financial statements ifAcme’s inventory were agricultural products instead of computers?
Acme Enterprises, a hypothetical company, manufactures computers and prepares its
financial statements in accordance with IFRS. In 2008, the cost of ending inventory was
€5.2 million but its net realizable value was €4.9 million. Th e current replacement cost
of the inventory is €4.7 million. Th is figure exceeds the net realizable value less a normal
profit margin. In 2009, the net realizable value of Acme’s inventory was €0.5 million
greater than the carrying amount.
1. What was the eff ect of the write-down on Acme’s 2008 financial statements? What
was the eff ect of the recovery on Acme’s 2009 financial statements?
2. Under U.S. GAAP, what would be the eff ects of the write-down on Acme’s 2008
financial statements and of the recovery on Acme’s 2009 financial statements?
3. What would be the eff ect of the recovery on Acme’s 2009 financial statements if
Acme’s inventory were agricultural products instead of computers?
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