I am very confused whether settlement discounts are deducted from Cost of Inventory or they are completely ignored under IAS 2.
In ACCA Studyhub text Chapter 7 , 7.1.4 Inventory Valuation (IAS 2) , It is written under valuation of Inventory topic, Prompt payment discounts (settlement discounts) are also deducted from the cost of inventory.
But in the ACCA Studyhub quiz, the answer to one of the question is that it is not taken in cost of inventory. See below:
Question
Which of the following would not be included as a cost of inventory in accordance with IFRS accounting standards?
A. Trade discounts
B. Purchase cost
C. Prompt payment discounts
D. Delivery costs
The correct answer is C.
IAS2 Inventories states that the cost of an item of inventory would include purchase costs, trade discounts on that purchase costs and the cost of delivery – because these are the costs to bring the asset to its present location and condition.
Prompt payment discounts are explicitly not allowed as these relate to how the goods are paid for, rather than their purchase.
Please someone help me and explain whether settlement discount is ignored or deducted?