If the selling price of inventory that has been written down to net realisable value in a prior period, subsequently recovers, the:
A) previous amount of the write-down can be reversed;
B) carrying amount of the inventory cannot be adjusted;
C) value adjustment can be recognised immediately in equity;
D) adjustment must be recognised in a 'provision for future inventory write-downs' account.

Question

Quizplus · Accepted Answer

If the selling price of inventory that was previously written down to net realisable value subsequently recovers, the previous amount of the write-down can be reversed. This is because the write-down was a conservative estimate of the inventory's value, and if the actual selling price is higher than the estimated value, the inventory should be written up to reflect its true value.

If the Selling Price of Inventory That Has Been Written