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Malaysia FRS 102 –Inventories : Highlight of Changes

Published by slang May 30th, 2006 in MASB News, Malaysia

Extracted from MASB

FRS 102 Inventories take effect for annual periods beginning on or after 1 January 2006

The main changes from FRS 102 2004 are tabulated as follows:

Section Requirements
Objective and Scope
  • The objective and scope paragraphs of FRS 102-2004 were amended by removing the words ‘held under the historical cost system’, to clarify that the Standard applies to all inventories that are not specifically excluded from its scope.
Scope Clarification
  • some types of inventories are outside its scope while certain other types of inventories are exempted only from the measurement requirements in the Standard.
  • Paragraph 3 establishes a clear distinction between those inventories that are entirely outside the scope of the Standard (described in paragraph 2) and those inventories that are outside the scope of the measurement requirements but within the scope of the other requirements in the Standard.
Scope Exemptions
  • does not apply to the measurement of inventories of commodity broker-traders to the extent that they are measured at fair value less costs to sell.
Cost of Inventories
Other costs
  • when inventories are purchased with deferred settlement terms, the difference between the purchase price for normal credit terms and the amount paid is recognised as interest expense over the period of financing. However, trade discounts, rebates and other similar items are deducted in determining the costs of inventories.
Consistency
  • incorporates the requirements of IASB SIC-1 Consistency - Different Cost Formulas for Inventories that an entity use the same cost formula for all inventories having a similar nature and use to the entity.
Prohibition
  • does not permit the use of the last-in, first-out (LIFO) formula to measure the cost of inventories.
Recognition as an Expense
  • eliminates the reference to the matching principle.
  • describes the circumstances that would trigger a reversal of a write-down of inventories recognised in a prior period.
Disclosure:
  • To disclose the carrying amount of inventories carried at fair value less costs to sell.
  • To disclose the amount of any write-down of inventories recognized as an expense in the period and eliminates the requirement to disclose the amount of inventories carried at net realizable value.

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