stockprovision
Stock provision, also known as inventory provision or allowance for stock obsolescence, is an accounting estimate recorded to cover potential losses from inventory that may become obsolete, damaged, or otherwise unsellable. It helps ensure inventory is reported at the lower of cost and net realizable value and aligns with conservative financial reporting.
Recognition and accounting practice vary by jurisdiction, but the general approach involves establishing a contra-inventory allowance
Estimation methods rely on factors such as aging of stock, demand forecasts, historical write-offs, and market
Example: A company with 1,000,000 of inventory identifies 50,000 at risk of obsolescence. The entry might be
Regulatory context: IFRS requires measurement at the net realizable value, with reversals possible under some circumstances.