IAS 2 Inventories

IAS 2 Objective Scope Definitions

Objective

1 The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.

Scope

2 This Standard applies to all inventories, except financial instruments; and biological assets related to agricultural activity and agricultural produce at the point of harvest (see IAS 41 Agriculture).

3 This Standard does not apply to the measurement … Read more

IAS 2 Measurement of inventories

9 Inventories shall be measured at the lower of cost and net realisable value.

Cost of inventories

10 The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Objective

11 The costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.

Costs of conversion

12 The costs of conversion of inventories include costs directly related … Read more

IAS 2 Recognition as an expense

34 When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

35 Some inventories may be allocated to other asset accounts, for example, inventory used as a component of self-constructed property, plant or … Read more

IAS 2 Disclosure

36 The financial statements shall disclose:

  1. the accounting policies adopted in measuring inventories, including the cost formula used;
  2. the total carrying amount of inventories and the carrying amount in classifications appropriate to the entity;
  3. the carrying amount of inventories carried at fair value less costs to sell;
  4. the amount of inventories recognised as an expense during the period;
  5. the amount of any write-down of inventories recognised as an expense in the period in accordance with paragraph 34;
  6. the amount of any reversal of any write-down that is recognised as a reduction in the amount of inventories recognised as expense in the period in accordance with paragraph 34;
  7. the circumstances or events that led to the reversal of a write-down of
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