Extracts from relevant Accounting Standards for Private Enterprises (ASPE)
Section 3031, Inventories, paragraphs 3031.08, 3031.10, and 3031.27-.32
Section 3031 states that inventories shall be measured at the lower of cost and net realizable value. Net realizable value refers to the net amount that an entity expects to realize from the sale of inventory in the ordinary course of business.
The cost of inventories may not be recoverable if, for example, certain inventory is no longer favourable due to customer preferences for sustainable products or inventory emits high greenhouse gas emissions. Such climate-related matters can, as discussed in educational material published by the IFRS Foundation, cause inventories to become obsolete, selling prices to decline, or increase input costs. If the carrying amount of inventories is not fully recoverable, Section 3031 requires an entity to write down those inventories to their net realizable value. An entity tests the impairment of inventory during each subsequent period.