IAS 2

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February 1, 2016 at 5:51 pm #298880
fazeel93
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I was doing audit risk questions and came across to situations regarding inventory valuation,
In the first question due to fluctuations in raw material prices auditor response was to take inventory at average cost and
In the second question sale price – profit margin was used as valuation due to it being a close approximation of costs
Isn’t according to IAS 2 inventory is valued at lower of cost or at NRV only? Are these exceptions to the standard?
February 1, 2016 at 8:22 pm #298891
Ken Garrett
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Inventory must be valued at the lower of cost and NRV.
Your examples of average cost or working back from selling price are methods of working out the cost. So, the most common methods are FIFO or average cost, but LIFO is not allowed.
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