I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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Example disclosure 

An example of disclosure for inventories is given below. 

Accounting policies  

Inventories 

Inventories are valued at the lower of cost and NRV. Cost is determined using the first in, first out 

(FIFO) method. NRV is the estimated selling price in the ordinary course of business, less the 

costs estimated to make the sale. 

Note X: Inventories 

 

 

 

20X1 

$'000

20X0 

$'000

Raw materials 

 31 

 28 

Work in progress 

 23 

 25 

Finished goods 

 25 

 15 

 

 79 

 68 

Included in the carrying value presented above was $8,000 (20X0: $10,000) of inventories held 

at NRV. 

 

6

   Company accounts for internal purposes 

The large amount of information in this chapter so far has really been geared towards the financial 

statements companies produce for external reporting purposes. In particular, the IFRSs discussed here 

are all concerned with external disclosure. However, companies do produce financial accounts for 

internal purposes. 

It will often be the case that financial accounts used internally look very similar to those produced for 

external reporting for various reasons. 

(a) 

The information required by internal users is similar to that required by external users. Any 

additional information for managers is usually provided by management accounts. 

(b) 

Financial accounts produced for internal purposes can be used for external reporting with very 

little further adjustment. 

It remains true, nevertheless, that financial accounts for internal use can follow whichever format 

managers wish. They may be more detailed in some areas than external financial accounts (perhaps 

giving breakdown of sales and profits by region or by product), but may also exclude some items. For 

example, the taxation charge and dividend may be missed out of the statement of profit or loss.  

You should always read question requirements carefully to discover whether you are being asked to 

produce accounts for external or internal purposes. Even when producing the latter, however, it is a good 

idea to stick to the external statement formats, as these show best practice. 

Now try this exercise. 

 

 EXAM FOCUS POINT 

Please note that this question is not intended to represent a 15 mark question in the exam. It is far 

more detailed. However, the ACCA examining team has suggested that it is useful for students to work 

through an exercise like this one, which shows how the various statements are linked together.

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