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Inventory: Reversal of write down of Inventory IFRS

Why the reversal of inventory has to reduce COGS.

“In each subsequent period, a new assessment of net realisable value is made. Reversal (limited to the amount of the original write-down) is required for a subsequent increase in value of inventory previously written down. The reversal of any write-down of inventories is recognised as a reduction in cost of sales (reduction in the amount of inventories recognised as an expense).” CFA Curriculum book  pg 426.

With reversal the Current asset should increase by that amount why COGS is reduced?. What am I missing?


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When there is a write down of inventory (opposite to reversal of write down) there is an increase in cogs, so you are basically doing the opposite when there is a reversal (decrease in cogs). And yes, the inventory is going to be increased by the reversal (up to the initial loss recognized: if I wrote down $3 {suppose my inventory was worth 10 and now 7} of inventory I can only revalue up to 3 USD {even though my inventory is valued at 15}). 

Hope I made myself clear

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Thanks for the reply,

So if my understanding is correct:

On write down

 COGS                               $3 Debit +

    Inven. Valuation Allowance.     $3 Crdit -

On reversal:

Inven. Valuation Allowance   $3 Debit +

    COGS                                         $3 Credit -   (Hence reduction)

Is this correct?


Simplify the complicated side; don't complify the simplicated side.

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