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IAS 2 contains the requirements on how to account for most types of inventory. The standard requires inventories to be measured at the lower of cost and net realisable value (NRV) and outlines acceptable methods of determining cost, including specific identification (in some cases), first-in first-out (FIFO) and weighted average cost.
- IAS 7
IAS 7 requires an entity to present a statement of cash...
- Inventories
Overview. IAS 2 Inventories contains the requirements on how...
- IAS 7
BASIS FOR CONCLUSIONS. International Accounting Standard 2 Inventories (IAS 2) is set out in paragraphs 1–42 and the Appendix. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 2 should be read in the context of its objective and the Basis for Conclusions, the Preface to ...
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About. IAS 2 provides guidance for determining the cost of inventories and the subsequent recognition of the cost 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. Inventories are measured at the lower of cost and net realisable value.
- Definition of Inventories
- Administrative Supplies
- Work-In-Progress of A Service Provider
- More About IAS 2
Inventories, as defined in IAS 2.6, are assets: 1. Held for sale in the ordinary course of business; or 2. In the process of production for such sale; or 3. In the form of materials or supplies set for consumption during the production process or in the provision of services. To illustrate, inventories can be goods bought by a retailer for resale, ...
Administrative or office supplies like printing paper aren’t covered by IAS 2, as they don’t fit the definition in IAS 2.6. Typically, they’re not of significant value and are therefore recognised as expenses upon receipt. However, they can be recognised as assets based on a company-specific accounting policy developed under IAS 8.10-12.
With the introduction of IFRS 15, paragraph IAS 2.19, which related to the cost of inventories of service providers, was removed. Previously, this paragraph detailed that such costs mainly encompassed the expenses of personnel directly involved in service provision, inclusive of supervisory staff, and relevant overheads. The deletion by IFRS 15 sug...
See other pages relating to IAS 2: IAS 2: Scope, Definitions and Disclosure IAS 2: Cost of Inventories IAS 2: Cost Formulas (FIFO, LIFO and Weighted Average Cost) IAS 2: Net Realisable Value (NRV)
IAS 2 requires that inventories are measured at the lower of cost and net realisable value. ‘Cost’ includes all costs of bringing the item to its current location and condition. The cost of inventories should be assigned using either the first-in first-out or weighted average cost method.
The Interpretations Committee discussed this issue and noted that paragraph 18 of IAS 2 Inventories requires that when an entity purchases inventories on deferred settlement terms, and the arrangement contains a financing element, the difference between the purchase price on normal credit terms and the amount paid is recognised separately as interest expense over the period of the financing.
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Commodity brokers who measure inventory at fair value less costs to sell. Also refer: IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine INVENTORIES ARE MEASURED AT THE LOWER OF COST AND NET REALISABLE VALUE (NRV) (This is an implicit impairment test, thus inventories are excluded from the scope of IAS 36 Impairment of Assets)
