How to Reverse an Inventory Write-Down When Market Prices Recover Under IFRS
Recording the reversal of a prior NRV write-down when the inventory's market price recovers, up to the original cost.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Merchandise Inventory | Asset (+) | 400.00 | - |
| Inventory Loss Reversal (COGS) | Expense (-) | - | 400.00 |
💡 Accountant's Note
Under IFRS, if you wrote down stock due to a price drop but the price recovers, you must reverse the loss up to the original cost. This is NOT allowed under US GAAP.
Practitioner & Systems Framework
💻 ERP Architecture
Track the original cost and any write-downs per SKU separately in the ERP. When market prices recover, calculate the reversal as the lower of the original cost and the new NRV — the inventory cannot be written up above original cost. Record the reversal as a reduction in COGS (or a COGS credit). Perform NRV assessments at every reporting date — both write-downs and write-ups are required when NRV changes.
⚠️ Audit Flags
Auditors verify that reversals do not exceed the original write-down amount for each item. Inflating inventory through excessive reversals (writing up above original cost) is not permitted under IAS 2 and is a material misstatement. Evidence of the NRV recovery (updated pricing data, supplier confirmations, recent sales at higher prices) is required to support the reversal.
📄 Required Documentation
Original write-down entry and amount per SKU, NRV recovery evidence (market price data, recent sales transactions, supplier price lists), reversal calculation (min of original cost vs. new NRV minus prior write-down), and period-end NRV assessment memo.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.