IAS 2: Inventories

Question 1

The standard provides guidance on the determination of cost and its subsequest recognition as an expense, including any write-down to Net realisable value

Answer 1

.

Question 2

Definition inventories

Answer 2

Inventories are assets HELD FOR SALE in the ordinary course of business

Question 3

The principle of inventory valuation..

Answer 3

is that inventories should be valued at the lower of cost and Net realisable value.

Cost , including additional costs to bring the product or service to its present location and condition

NRV, The estimated selling price less the less the estimated costs of completion and the estimated costs necessary to make the sale.

Different items or groups are compared separately

Question 4

IAS 2 allows 2 different methods to calculate cost

Answer 4

FIFO and AVCO

Question 5

Why is the CI figure important

Answer 5

The matching principle (Affects CoS & Profit)

When inventories are sold, the CA of those inventories shall be recognised as an expense in the period in which the related revenue is recognised.

The amount of any write-down of inventories to NRV and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs

Question 6

FIFO explain brief

Answer 6

First in first out

assumes that those items bought first are the first to be used in production or selling

Question 7

AVCO explain brief

Answer 7

‘Average cost’ or ‘Weighted average cost’

1. Average cost of items held at the beginning of any period is calculated.
2. Items are issued at that average cost.
3. When new inventory is received the average issue price will need recalculated

Question 8

AVCO Kaplan KB

Answer 8

The cost of an item of inventory is calculated by taking the average of all inventory held.

The average cost can be calculated periodically or continuously

Question 9

FIFO Kaplan KB

Answer 9

For costing purposes the first items of inventory received are assumed to be the first ones issued.

The cost of the closing inventory is the cost of the younger inventory

Question 10

Inventory cost

Answer 10

The purchase price plus the cost of getting the inventory into its current position, for example, a supplier’s delivery charges.

Question 11

Calc for inventory NRV

Answer 11

The expected selling price of the inventory, less any further costs to be incurred such as selling or distribution costs or repairs.