Counting every jacket correctly does not prove that the stock is valued correctly. For an ACCA learner in Nepal, a seasonal outdoor-retail example makes the distinction between inventory quantity and recoverable value easier to see. The calculation begins with evidence about what the business expects to recover, not with a general statement that tourism has been quiet.
The shop, prices and stock conditions below are fictional. No market forecast or claim about actual retailers is intended. The example applies a simplified IAS 2 learning model rather than Nepal-specific tax or statutory reporting advice.
Start with two different batches
Batch A contains 40 jackets costing NPR 6,000 each. The expected selling price has fallen to NPR 5,700 and the shop expects a direct selling cost of NPR 200 per jacket. Estimated net realisable value is therefore NPR 5,500 each. Using the lower of cost and that estimate gives a batch carrying amount of NPR 220,000 and a write-down of NPR 20,000.
Batch B contains 30 different jackets costing NPR 4,000 each. Their expected selling price is NPR 4,800 with NPR 200 of selling costs, producing net realisable value of NPR 4,600 each. This batch stays at cost of NPR 120,000 in the exercise; it is not written up to its expected selling return.
The two batches together are consequently carried at NPR 340,000. The expected profit on Batch B is not used to erase the loss identified on the separately assessed Batch A products.
Ask whether the selling estimate is credible
A label saying “clearance price” is not enough. The reviewer would want the condition of the goods, recent comparable sales, any actual orders and the assumptions behind unavoidable selling costs. A damaged item might require repair or different disposal arrangements. Stock that is merely slow-moving needs analysis rather than an automatic zero value.
Create a line for each relevant product group with quantity, recorded unit cost, expected selling amount, completion costs if any, selling costs and the evidence date. Keep the calculation reproducible. If a manager changes an estimate, preserve the reason and the version it replaced.
Keep the stocktake and valuation work connected
A count sheet can flag damaged packaging, incomplete sets or obsolete designs. Those observations should reach the person preparing the valuation schedule. Otherwise the physical count may be accurate while the accounting file still assumes that every item is in saleable condition.
The reverse problem is also possible: the valuation schedule may include a thoughtful estimate for stock that is no longer on hand. Reconcile quantities to the count record before debating the final selling price.
Explain what happens if expectations improve
Suppose next period’s evidence supports net realisable value of NPR 5,900 for a remaining Batch A jacket previously written down to NPR 5,500. In the simplified case, reassess the previous reduction under IAS 2. Do not describe an improvement as permission to carry the item above its original cost. Keep evidence about the changed circumstances, not just the higher price written into the spreadsheet.
Turn the exercise into an exam answer
Write a short conclusion distinguishing three issues: quantity is supported by the count; cost comes from the appropriate cost records; recoverability depends on the selling estimate. Then calculate a new result if selling costs for Batch A rise by NPR 150 each. The purpose is to show the consequence of an assumption, rather than reciting a definition and leaving the numbers unexplained.
Sources and further study
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