When should inventories recognize in financial statements?

Inventories are the entity’s assets that report in the financial statements are current assets in the balance sheet.

The recognition of inventories in the financial statements of the entity is similar to the recognition of other assets.

In order words, the inventories should be recognized in the financial statements when the inventories meet the definition of assets in the financial frameworks.

Based on the financial frameworks, assets are the resources that control by an entity as the result of past transactions, and the future economy of those assets is expected to into an entity and the value of those assets could measure reliably.

Therefore, the entity could recognize inventories in the financial statements if those inventories are under the control of the entity.

And entity will gain the economic inflow as the result of the use or trade of those inventories. The value of inventories should be measured reliably.

For example, if the entity purchases the goods for trading, the entity should recognize inventories in its financial statements at the time the entity has full control over those entities.

In other words, risks and rewards of inventories are transferred to the entity.

Goods received normally play as the main documents for recording inventories. However, for international transactions, there are certain conditions, for example, FOB and CIF of contracts.

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