GROUP:14
ASSIGNMENT:2
AIS 1201 & 1206
Name: Saria Aktar
Roll: 250303023
Summery of IAS-2 (Inventories)
Inventories:
IAS 2 inventors was originally issued in 1993, adopted by the Board in 2001, and
revised in 2003. Later, minor amendment were made by IFRS 13, 9, 15 and 16.
objective
The objective of this standard is to prescribe the accounting treatment and caused
recognition of inventories. Reference: paragraph -1(IAS-2)
score
This standard applies to all inventories except:
● Financial instrument
● Biological assets and agricultural produce at harvest. It also does not apply to
inventories held by:
● Producers of agricultural forest mineral products measured at NRV.
● Commodity broker-traders measured at fair value less cost to sell.
Reference: paragraph -2( IAS-2)
Definition
The following terms are used in this standard with the meanings specified:
Inventories are assets:
1. Held for sale in the ordinary course of business.
2. In the process of production for sauce sale; or
3. In the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Net realisable value is the estimated selling price in the ordinary course of
business less than estimated costs of completion and the estimated costs
necessary to make the sale.
Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measuresment date . Reference: paragraph-6 (IAS-2)
Measurements of inventories:
Inventories shall be measured at the lower of cost and net realisable value.
(Ref:para-9(IAS 2)
Cost of inventories
The cost of inventories shall comprise all cost of purchase ,costs of and conversion
and other costs incurred in bringing the Inventories to their present location and
condition. Ref:para-10,11,12&15 (IAS-2)
Cost of formulas
The cost of inventories of items that are not ordinarily interchangeable and goods
or services produced and segregated for specific projects shall be assigned by
using specific identification of their individual costs. Ref:para-23(IAS 2)
The cost of inventories, shall be assigned by using the first and first out FIFO or
weighted average cost formula. B Ref:para-24(IAS 2)
Net Realisable Value
NRV means the estimated selling price of inventory minus the estimated costs of
completion and selling expense. Ref:para-28,29,30(IAS 2)
Recognition as an expense:
When inventories are sold their carring amount is recognised as an expense in the
same period as the related [Link] write-down or loss is treated as an
revenue and any reversal due to increase in NRV is treated as a reduction of
expense. Ref:para-34(IAS 2)
Disclosure:
Financial statements Must disclose inventory accounting policy,total inventory
value, expense/ write-down reversal amounts reasons for revesal and any
inventory used as security. Ref:para-36(IAS-2)
The summary of IAS 2 inventories is given above.