My company is looking to use the standard costing method for its purchased parts. However we find that updating the standard cost of a part revalues its inventory on hand. In the case of a standard cost increase, this behavior does not comply with IFRS accounting standards, as they only allow an adjustment increasing the inventory value when it is to reverse a previously-made write-down. Does anyone have a way to work around this issue?
Although the gross value of your inventory does revalue with a standard cost change, your net value should not change by capitalizing the change in a separate inventory account that nets against the gross value.
You can then amortize the std value change balance in the separate inventory account via some release mechanism (i.e. inventory turns)
For example, you have a part at $100. New std is $105. Assuming you have one unit in inventory, gross inventory balance changes from $100 to $105 but you have -$5 in the separate inventory account which when netted against the $105 totals $100.
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