IAS 2 -

Inventory SBR

International – Nufail Naleem

IAS 2 – Inventory
Introduction
Inventories are Stocks that are used for normal Business Operations
2. Work in Progress 3. Finished Goods
Example – Toyota Company will have the
Inventories Comprises of
following as Inventory
1. Raw Material – Steel/ Tires
1. Raw Materials
2. WIP – Partly Completed Car
3. Finished Goods – Fully Completed Car Business Operations, Example for Imperial
College Car is a Non Current Asset. Books and
Study Material Stationaries are inventory

Exam Focus
In Exams you need to be careful about the
Accounting Treatment

Initial Recognitions

All the Inventories are Initially recognised at Cost Historical Cost Convention
6. Other Directly Attributable Cost 7. Conversion
Cost Comprises of the Following Cost
8. Abnormal wastage
1. Purchase Cost 9. Storage
2. Import Duties 10. Administration cost
3. Irrecoverable Tax Conceptual Framework
4. Transport Cost
5. Handling Cost 1. Historical Cost
 Lower of Cost or Net Realisable Value (NRV) NRV
2. Realisable Value
3. Current Cost = Selling Price – Conversion Cost – Selling Cost
4. Present Value
Illustration

The Following Valuation Techniques can be used

1. Actual Unit Cost
2. First in First Out (FIFO)
3. Weighted Average Cost (AVCO) Prudence Concept
Subsequent Recognition

All Inventories are subsequently measured at

$1000
Cost
 Loss

Journal Entry
NRV

(200) $800 Impairment

Dr Statement of Profit or Loss 200 Cr

Inventory 200
Disclosure

1. Total Carrying amount of Inventories

2. Details of Inventories carried at NRV