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About: and Presentation of Inventories in The Context of The Historical Cost System (Issued in

IAS 2 provides guidance on inventory cost determination and expense recognition, including write-downs to net realizable value. It outlines cost inclusion, measurement at lower of cost or net realizable value, and assignment methods for inventory costs. The standard has evolved since its initial adoption in 2001, with revisions and amendments from other IFRS standards over the years.

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30 views1 page

About: and Presentation of Inventories in The Context of The Historical Cost System (Issued in

IAS 2 provides guidance on inventory cost determination and expense recognition, including write-downs to net realizable value. It outlines cost inclusion, measurement at lower of cost or net realizable value, and assignment methods for inventory costs. The standard has evolved since its initial adoption in 2001, with revisions and amendments from other IFRS standards over the years.

Uploaded by

Jolaica Diocolano
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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. Net
realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories includes all costs of purchase, costs of conversion (direct labour
and production overhead) and other costs incurred in bringing the inventories to their
present location and condition. The cost of inventories is assigned by:

 specific identification of cost for items of inventory that are not ordinarily
interchangeable; and
 the first-in, first-out or weighted average cost formula for items that are ordinarily
interchangeable (generally large quantities of individually insignificant items).

When inventories are sold, the carrying amount of those inventories is 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 are
recognised as an expense in the period the write-down or loss occurs.

Standard history
In April 2001 the International Accounting Standards Board (Board) adopted IAS
2 Inventories, which had originally been issued by the International Accounting
Standards Committee in December 1993. IAS 2 Inventories replaced IAS 2 Valuation
and Presentation of Inventories in the Context of the Historical Cost System (issued in
October 1975).

In December 2003 the Board issued a revised IAS 2 as part of its initial agenda of
technical projects. The revised IAS 2 also incorporated the guidance contained in a
related Interpretation (SIC-1 Consistency—Different Cost Formulas for Inventories).

Other Standards have made minor consequential amendments to IAS 2. They include
IFRS 13 Fair Value Measurement (issued May 2011), IFRS 9 Financial
Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)
(issued November 2013), IFRS 15 Revenue from Contracts with Customers (issued
May 2014), IFRS 9 Financial Instruments (issued July 2014) and
IFRS 16 Leases (issued January 2016).

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