IAS 2 Inventories

ACCA IAS(International Accounting Standards)

IAS 2 Inventories

IAS 2 Inventories specifies how to account for the majority of inventory kinds. The standard requires inventories to be measured at the lower of cost and net realisable value (NRV), and it specifies appropriate cost-determination methods, such as particular identification (in some situations), first-in-first-out (FIFO), and weighted average cost.

Net realizable value (NRV) is the estimated selling price less the estimated completion costs and the estimated costs to complete the transaction.
Inventory expenses — total costs incurred in moving inventory to their current location and condition, including purchase and conversion costs.

  • Inventory acquisition expenses include the purchase price (minus trade discounts, rebates, and similar goods), irrecoverable taxes, and transport, handling, and other costs directly related to their acquisition.
  • Conversion costs include expenditures directly associated to manufacturing units, such as direct labour, as well as systematically assigned fixed and variable production overheads incurred in the creation of final items.

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