IAS 2 - Inventory (Summary)

Inventories

IAS 2 – Inventories

•       Explain the requirements of how to account for different kind of inventories and which expenses should be recognized.
  

• •  It requires to value the inventory at the lower of cost and estimated selling price less selling costs for each separate item or product (Net realizable value).
  

• • The cost of inventory includes all the costs of getting the item to the current location

And condition

• ·      It shows methods to value inventory.

-        First in, first out (FIFO)

-        Weighted average method

•  The cost involved in the inventory:

1. ·       Purchase Cost (including taxes)
2. ·       Transport
3. ·       Handling
4. ·       Translation cost (Fixed and variable manufacturing overhead) 

Cost should be avoided:

· Administrative overheads unrelated to production 

· Selling costs 

· Storage costs 

· Abnormal waste 

· Foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a foreign currency 

· Interest cost when inventories are purchased with deferred settlement terms.

Tags: inventories, inventory, IAS 2, IAS-2 inventories, 

Ref: www.iasplus.com, www.ifrs.org