If a material amount of inventory has been ordered through a formal purchase contract at the statement of financial position date, for future delivery, at firm prices,
A) this fact must be disclosed.
B) disclosure is required only if prices have declined since the date of the order.
C) disclosure is required only if prices have since risen substantially.
D) an appropriation of retained earnings is necessary.

Question

Quizplus · Accepted Answer

The fact that a material amount of inventory has been ordered through a formal purchase contract at the statement of financial position date for future delivery at firm prices should be disclosed in the notes to the financial statements as it may significantly impact the future financial position and performance of the company. This disclosure is required irrespective of whether prices have since risen or declined. An appropriation of retained earnings is not necessary in such a scenario.

If a Material Amount of Inventory Has Been Ordered Through