IAS 2 Inventory
What is inventory?
Inventory is the term used to describe goods, materials and supplies held at the
accounting period end that have been purchased by a business and are either ready for
sale or used in production of completed products for sale.
Classification of inventories:
Goods purchased for resale
Raw materials and components used in manufacturing
Goods/services in intermediate stages of completion (WIP)
Finished goods ready to be sold
IAS 2 inventory applies to all inventories EXCEPT:
Financial instruments (IAS 32 & IFRS 9)
Biological assets (IAS 41)
Measurement
Cost
Lower of
Net Realisable Value
Cost
1. Purchase cost NOTE: settlement discount (cash
Cost of material less trade discount discount) is usually not recorded in
the books at the time of sale
Import duty because of uncertainty. Thus only
Other taxes trade discount is considered.
Carriage inwards
2. Conversion cost
Direct material cost
Direct labor cost
Production overhead – rent, wages etc
3. Other cost
Production royalty
What is inventory?
Inventory is the term used to describe goods, materials and supplies held at the
accounting period end that have been purchased by a business and are either ready for
sale or used in production of completed products for sale.
Classification of inventories:
Goods purchased for resale
Raw materials and components used in manufacturing
Goods/services in intermediate stages of completion (WIP)
Finished goods ready to be sold
IAS 2 inventory applies to all inventories EXCEPT:
Financial instruments (IAS 32 & IFRS 9)
Biological assets (IAS 41)
Measurement
Cost
Lower of
Net Realisable Value
Cost
1. Purchase cost NOTE: settlement discount (cash
Cost of material less trade discount discount) is usually not recorded in
the books at the time of sale
Import duty because of uncertainty. Thus only
Other taxes trade discount is considered.
Carriage inwards
2. Conversion cost
Direct material cost
Direct labor cost
Production overhead – rent, wages etc
3. Other cost
Production royalty
