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
- · It shows methods to value inventory.
- First in, first out (FIFO)
- Weighted average method
- The cost involved in the inventory:
- · Purchase Cost (including taxes)
- · Transport
- · Handling
- · 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
