Document ID: chunk:federal_register_of_legislation:F2022C00496:body:0:p16
Version: federal_register_of_legislation:F2022C00496
Segment Type: other
Provision Reference: 
Character Range: 39762–42647

replacement cost [carrying amount].  The Board also noted that the records of the three prices might also need to be maintained to facilitate the reversal of write downs in the event that the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in current replacement cost because of changed economic circumstances.

Alternative solutions
BC10 The Board considered developing a proposed solution only in respect of long-lived inventories held for distribution by not-for-profit entities in order to address the practical problems raised by constituents.  However, the Board concluded that it would be more appropriate to develop a solution for all types of inventories held for distribution by not-for-profit entities that addresses the issues at both the principle and practical levels.  This is because the Board prefers a solution based on a high-level principle that can be applied consistently by all not-for-profit entities in a manner that best suits the character of their inventories held for distribution.
BC11 Among the possible solutions considered by the Board was applying an AASB 136 Impairment of Assets-style impairment test, however, it was noted that this would have many of the problems already associated with the existing requirements.

Cost adjusted when applicable for any loss of service potential
BC12 The Board noted that the lower of cost and net realisable value requirement in AASB 102 in respect of inventories other than those held for distribution can be viewed as being based on a notion of recognising a loss of service potential in a for-profit environment.  That is, an entity that seeks to sell inventories for more than they cost generally considers the service potential of those inventories in financial terms.  If net realisable value falls below cost, the entity can be viewed as suffering a loss of service potential.
BC13 The Board observed that the lower of cost and current replacement cost requirement for measuring inventories held for distribution by not-for-profit entities can be viewed as seeking to emulate the approach taken for other inventories and its focus is also on a loss of value in financial terms.  However, the Board considered that this financial measure of the loss of service potential may not always be the most relevant measure in respect of inventories held for distribution by not-for-profit entities for the reasons outlined in paragraph BC6.
BC14 The Board considered that the measurement of inventories held for distribution by not-for-profit entities at cost, adjusted when applicable for any loss of service potential, is consistent with the Framework for the Preparation and Presentation of Financial Statements, which notes at paragraph Aus49.1:
In respect of not-for-profit entities in the public or private sector,