DefinitionsDefinitions

Definitions

6 The following terms are used in this Standard with the meanings specified.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See AASB 13 Fair Value Measurement.)

Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Aus6.1 The following terms are also used in this Standard with the meanings specified.

A not-for-profit entity is an entity whose principal objective is not the generation of profit. A not-for-profit entity can be a single entity or a group of entities comprising the parent entity and each of the entities that it controls.

In respect of not-for-profit entities, current replacement cost is the cost the entity would incur to acquire the asset at the end of the reporting period.

In respect of not-for-profit entities, inventories held for distribution are assets:

(a) held for distribution at no or nominal consideration in the ordinary course of operations;

(b) in the process of production for distribution at no or nominal consideration in the ordinary course of operations; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services at no or nominal consideration.[1]

7 Net realisable value refers to the net amount that an entity expects to realise from the sale of inventory in the ordinary course of business. Fair value reflects the price at which an orderly transaction to sell the same inventory in the principal (or most advantageous) market for that inventory would take place between market participants at the measurement date. The former is an entity-specific value; the latter is not. Net realisable value for inventories may not equal fair value less costs to sell.

8 Inventories encompass goods purchased and held for resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the entity and include materials and supplies awaiting use in the production process. Costs incurred to fulfil a contract with a customer that do not give rise to inventories (or assets within the scope of another Standard) are accounted for in accordance with AASB 15 Revenue from Contracts with Customers.