What happens to impairment losses in inventory under UK GAAP FRS 102?

Under UK GAAP FRS 102, impairment losses on inventory can indeed be reversed if the circumstances that initially led to the impairment no longer exist. This is aligned with the principle of reflecting the economic reality of the inventory's value. If the factors that contributed to the impairment—such as a decline in market price or a change in demand—are resolved, the inventory may regain its value.

Thus, when assessing whether to reverse an impairment loss, management must consider the current conditions affecting the inventory's valuation. This not only ensures a more accurate portrayal of the company's financial position but also adheres to the prudent approach of accounting that FRS 102 promotes, permitting a balance between caution and fair representation of assets.

In contrast, the other options either suggest restrictions on the treatment of impairment losses or focus on inappropriate measures of valuation that do not apply under the FRS 102 framework.