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Thursday 18 December 2014

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Long-term prepayments in inventory supply contracts

IAS 2 Inventories Long-term prepayments in inventory supply contracts


 Work in progress

Issues related to the application of IAS 2

The IFRS Interpretations Committee (the ‘Interpretations Committee’) received a request seeking clarification on the accounting for long-term supply contracts of raw materials when the purchaser of the raw materials agrees to make significant prepayments to the supplier. The question is whether the purchaser should accrete interest on long-term prepayments by recognising interest income, resulting in an increase in the cost of inventories and, ultimately, the cost of sales.

Project stages

Deliberations

The results of outreach conducted on this issue will be discussed a future meeting of the Interpretations Committee