Sword Limited had inventory amounting to €120,000 in its statement of financial position at 31 December 2017. On 3 January 2018, a fire in the company’s warehouse severely damaged this inventory. The inventory will now realise only €50,000.

Requirement Indicate how this situation should be dealt with in order to comply with standard accounting practice. (Assume a financial year-end of 31 December 2017.)