After a write-down of inventories due to sluggish demand, Portia's Premium Pastas (PPP) suddenly and unexpectedly experienced a resurge in demand for its premium pastas. PPP is barely able to produce enough inventory to meet demand. Under IFRS, a reversal of the previous write-down would likely be appropriate with an explanation of the circumstances surrounding the reversal.

Question

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Under IFRS, if the reasons for a write-down of inventories (such as a decrease in net realizable value due to sluggish demand) no longer exist or have reversed, the amount of the write-down can be reversed up to the amount of the original write-down. This is reflected in the financial statements with an explanation of the circumstances surrounding the reversal, which in this case would be the unexpected resurgence in demand for PPP's premium pastas.

After a Write-Down of Inventories Due to Sluggish Demand, Portia's