IAS 2 Inventories
IAS 2 governs inventory accounting. It requires measurement at the lower of cost and net realisable value. Cost includes qualifying purchase, conversion and other costs of bringing inventory to its present location and condition. Interchangeable items generally use FIFO or weighted average; LIFO is not permitted. Recognise inventory cost as an expense when the related revenue is recognised.
Worked example
An item costs $70 but expected sale proceeds are $75 with $10 necessary selling costs: net realisable value is $65, so report inventory at $65.
Common mistake
Selling costs and abnormal waste are normally expensed, and a cost formula cannot override the lower-of-cost-and-NRV rule.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Supporting | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |