Rios, Inc.uses International Financial Reporting Standards (IFRS).In 2010, Rios, Inc.experienced a decline in the value of its inventory resulting in a write-down of its inventory from $240,000 to $200,000.The company used the loss method in 2010 to record the necessary adjustment and uses an allowance account to reduce inventory to NRV.In 2011, market conditions have improved dramatically and Rios, Inc.'s inventory increases to an NRV of $216,000.Which of the following will Rios, Inc.record in 2011?

Question

Quizplus · Accepted Answer

Under IFRS, if the NRV of inventory increases after a write-down, the write-down can be reversed up to the amount of the original write-down. In this case, the inventory was written down by $40,000 in 2010, and in 2011, the NRV increased by $16,000. Therefore, Rios, Inc. would debit the Allowance to Reduce Inventory to NRV by $16,000 to reflect the recovery.

Rios, IncUses International Financial Reporting Standards (IFRS)