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IAS 2 Inventories provides guidance for determining the cost of inventories and the subsequent recognition of the cost as an expense, including any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

The cost of inventories includes all costs of purchase, costs of conversion (direct labour and production overhead) and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is assigned by:

• Specific identification of cost for items of inventory that are not ordinarily interchangeable; and
• The first-in, first-out (FIFO) or weighted average cost formula for items that are ordinarily interchangeable (generally large quantities of individually insignificant items).

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs.

IAS 2 Inventories is Copyright: IFRS Foundation Inventory

Hierarchy

ID	Name	Level	x
IFRS	International Financial Reporting Standards	0	IFRS
IAS02	IAS 2 Inventories	1	IAS02

Term(s)

ID	Name	Clear	x
FIFO	First In, First Out		FIFO
INV	Inventory		INV

IAS 2 Inventories International Financial Reporting Standards 10002 1 IAS, IFRS, Standard, Financial, Accounting, Inventory, Valuation, Write-down, Asset IAS 2 provides guidance for determining the cost of inventories and the subsequent recognition of the cost as an expense, including any write-down to net realizable value