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Answer: €3,000.
Under IFRS, inventories are measured at the lower of cost and net realizable value (NRV). In Year 1, the inventory was written down to €97,000 (NRV) from €100,000 (cost), resulting in a write-down of €3,000. In Year 2, the NRV increased to €105,000, exceeding the original cost. IFRS allows for the reversal of the write-down, limited to the original amount (€3,000), which is recognized as a reduction in cost of sales. Option A is incorrect because IFRS permits reversals, unlike US GAAP. Option C is incorrect because the reversal cannot exceed the original write-down amount.
Author: LeetQuiz Editorial Team
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An analyst gathers the following information about an electronics manufacturing company's inventory:
Year 2:
Year 1:
As a result of the reversal of the write-down, the company's Year 2 financial statements should report a decrease in cost of sales of:
A
€0.
B
€3,000.
C
€8,000.
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