What is your opinion? Do you agree with the finance manager or any of his team members' suggestions?

IAS2,  Julie n°1

Answer (1) Julie.
According to IAS 2, "The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs".
According to my understanding the expense mentioned here is COGS or Cost of sales.
But not sales or admin expenses.

Accorfing to IAS2 iventory should be measured at the lower of cost or NRV, in this case our NRV is low shot it should be recorded at NRV and difference should be charged to P&L. Julie is right and different should be charged to CGS, becaut it is related to core operations of the business

In according with the recognised accounting standards the same has to be charged expense.

But the same has to charged to General expenses, since does not qualify for extra ordinary expense if the production/ valuation accounting period differs or the same can be charged to COGS if the production/ and valuation pertains to same accounting period

I agree if his suggetions agree with  the legislations that rules the affairs in establishments 

Your company will record AED2.35 million write down as a loss, thereby decreasing inventory and increasing cost of goods sold. Also, this needs to be included net profit or loss for the period in which it arises.

statement1 seems right

I believe both the finance manager’s and the team members’ perspectives are valuable, as they approach the project from different angles. My opinion would depend on the data and evidence supporting each suggestion. I would carefully review the financial analysis, risk assessments, and strategic impact before deciding. Ultimately, I would support the option that offers the best balance between profitability, risk management, and long-term organizational goals.

I agree with the Finance Manager to reduce the inventory to its Net Realizable Value (NRV) and charge the difference to the Income Statement. This follows the lower of cost or market principle and ensures inventory is not overstated.

The team members’ suggestions are less appropriate: charging to Cost of Sales or sales departments misstates operations, allocating as general expenses complicates reporting, and treating it as extraordinary is not in line with accounting standards. The Finance Manager’s approach provides the most accurate reflection of financial performance.

I agree with the Finance Manager’s decision to reduce inventory to its Net Realizable Value (NRV) and recognize the loss in the Income Statement. This treatment is in accordance with IFRS and reflects sound financial reporting practices, ensuring that the financial statements present a true and fair view of the company's financial position.

Julie’s View – Charge to "Cost of Sales"

• This reflects the cost of inventory that could not be recovered, which is directly tied to operational activities