IAS-2: Inventories


IAS -2 serves to define the proper accounting procedures for managing inventories. It offers comprehensive guidance on evaluating inventory costs and recognizing associated expenses, including write-downs to reflect net realizable value.
Scope of Inventories

Inclusions: Inventories comprise finished goods for sale, work in process, and raw materials and supplies consumed in production.
Exclusions: Excludes inventories from construction contracts, financial instruments, and certain agricultural assets.

Inventory Valuation Principle

Core Principle: Inventories are valued at the lower of cost and net realizable value (NRV).

Measurement of Inventory Costs

Cost Components: Inventory cost encompasses purchase costs, conversion costs, and other expenses related to the present state and location of inventories.
Exceptions: Excludes abnormal waste, storage costs, unrelated overheads, selling costs, foreign exchange variations, and certain interest costs.

Methods for Inventory Measurement

Cost Formulas: The standard cost and retail methods are acceptable if they approximate the actual cost.
Non-Interchangeable Items: Precise costs attributed to individual items.
Interchangeable Items: FIFO or weighted average cost formulas allowed; LIFO not permitted after 2003.

Write-Downs to Net Realizable Value (NRV)

Definition: NRV is the expected selling price minus completion and sale-related costs.
Recognition: Write-downs to NRV recorded as expenses when they occur; reversals recognized in the income statement during the reversal period.

Expense Recognition

IAS 18: Revenue recognition for sold goods is governed by IAS 18 Revenue.
Expense Recognition: Carrying the amount of sold inventories is recognized as expenses (cost of goods sold); write-downs and inventory losses are also recognized as expenses.

Disclosure Requirements

Mandatory Disclosures: Include accounting policy, carrying amounts categorized by type, inventory write-downs and reversals, inventory pledged as security, and costs recognized as expenses.
Alternative Presentation: Entities can disclose operating costs by nature and net change in inventories, aligning with IAS 1 Presentation of Financial Statements.

If You have any queries then connect with us at [email protected] or [email protected] & contact us  & stay updated with our latest blogs & articles

Don't forget to share this article :-

Stay Updated With Our Blogs!

Explore more of our blogs to have better clarity and understanding
of the latest corporate & business updates.

Why People Choose Our Services ?

Free Legal Advice

We provide free of cost consultation and legal advice to our clients.

Tech Driven Platform

All our services are online no need you to travel from your place to get our services.

Grow your business

Experts Team

We are a team of more than 15+ professionals with 11 years of experience.

Transparent pricing

There are no hidden & extra charges* other than the quote/invoice we provide.

100 % Client Satisfaction

We aim that all our customers are fully satisfied with our services.

On-Time Delivery

We value your time and we promise all our services are delivered on time.

Why Trust legal Suvidha?

People Who loved our services and what they feel.

In this Journey of the past 10+ years, we had gained the trust of many startups, businesses, and professionals in India and stand with a 4.9/5 rating in google reviews.We register business online and save time & paperwork.

Reno K Subramaniam
Reno K Subramaniam
I have recently registered a Private Limited firm and was looking for a CA to take care of the filings, Startup India Certificate, and other formalities. I have received emails from legal Suvidha and a few others. I tried talking to them all. But, Mr. Mayank from Legal Suvidha was very impressive and was patient enough, prompt to answer all the queries. He has a very professional team and after the initial formalities, I started interacting with the team. It's not even 2 weeks but I really feel overwhelmed by their service and professionalism. I received my startup India certificate yesterday and my filings have been done promptly. The team at legal suvidha Ms. Nidhi, Ms. Priyanka, Ms. Koshika, and Ms. Saloni all show the same professionalism and are readily available to take care of the official filings and stuff. Overall a great experience till now and looking forward to a great journey!
pankaj tiwari
pankaj tiwari
Legal suvidha is a team of genuine and experienced professionals who give you best services according to your profile
Raman Krishnan
Raman Krishnan
Saloni from legalsuvidha has done a excellent job for filling and geting certificate of DPIIT. Thanks to legalsuvidha.
Prakaash Hari
Prakaash Hari
Team Legal Suvidha offers a brilliant service. There communication is quite clear and they execute the job meticulously. We are a startup private limited company and their advice is so critical in making my decision. Well done team. Keep it up. Prakaash Hari, Director, ipixela.
Priyanka Rudra
Priyanka Rudra
Dedicated team and fast response
Dr. Vishal Ghag
Dr. Vishal Ghag
Been using their services since 3 years now and I am absolutely happy with Legal Suvidha. They have been supportive, understanding and highly skilled at helping me with my business needs.

Our Partnerships & Collaborations

Contact us and grow your business

Legal Suvidha App

Now all Professional Services in a Single Click !

Now get all the services required for your business in a single app.

Subscribe to our newsletter & grow your business

Subscribe To Our Newsletter .

Sign up to receive email updates on new product announcements, special promotions, sales & more.