Today I wanna write sth about inventory provision:

There are 10 inventory A needing accrual of provision because their NRV is less than their carrying value.

Each carrying value is 100, provision is 10

so the accounting entry is :

When 2 of these A are used to produce another inventory named B, the right treatment should be:

another kind of treatment is

The difference is that underestimate the cost of inventory-B 20 and overestimate the COGS of this preiod

But if inventory B is sold totally in the same preiod with the production of A, then another entry following the wrong treatment is:

while the right one is :

The net effect is the same for both treatment.

That is to say, unless all the B are sold in one period, the later treatment is wrong

BTW: under PRC GAAP, the provision is charged into "资产减值损失". Under IFRS, it is usually charged into COGS and sometimes G&A.