Under AASB 102 Inventories, items of inventory that are used by business enterprise as components in a self-constructed property asset are required to be:
A) aggregated into the 'cost of goods sold' expense in the period in which the items are used;
B) expensed directly into equity in the period in which the items are used;
C) capitalised and depreciated;
D) added to a 'property construction' provision account.

Question

Quizplus · Accepted Answer

Under AASB 102, items of inventory that are used in the construction of a self-constructed property asset should be capitalized as part of the cost of the property asset and depreciated over their useful life. Therefore, the best choice is C, which suggests that the items should be capitalized and depreciated. Option A and B are not appropriate as they suggest that these items should be expensed directly as a cost of goods sold or equity item, respectively, which is not in line with the accounting treatment required under the standard. Option D is also incorrect as there is no such account as "property construction provision account" under AASB 102.

Under AASB 102 Inventories, Items of Inventory That Are Used