IAS 2 Flashcards
Overview of IAS 2?
Account for most types of inventory
Measured at lower of cost & NRV
What do inventories include?
Assets held for sale in ordinary course of business (finalsied goods)
Productuin process for sale in ordinary course of business (work in progress)
Materials and supplies consumed in productions (the materials)
What do inventories not include?
Abnormal waste
Storage costs
Administrative overheads
Selling costs
Interest cost
What is meant by NRV?
Selling price - estimated cost of completion - estimated costs necessary to make a sale
Higher or lower of net realisable value or originial cost
Lower
What is cost?
Costs incurred in bringing inventory to its present condition and location
if selling price changes in notes?
ignore original selling prices
If two units are shown?
Means two different products
How are production overheads allocated?
Based on normal level, not actual level
Inventory received after year-end?
Debit: COGS
Credit: inventory
What does cost represent?
Costs of purchase
Costs of conversion
Other costs
What represents costs of purchase?
Purchase
Import duties
What represents costs of conversion?
Direct materials, direct labour, subcontracted work
Costs involved in converting to finished goods
Other costs related to bringing inventories to present location
What should actual cost of inventory be?
The actual unit cost of an item
When can NRV is less than cost?
Errors in production
Physical deterioration of inventory
Obsolescence
Increase in costs, or fall in selling price
