IAS 2
SCOPE:-
The Standard clarifies that some types of inventories are outside its scope while certain other types of inventories are exempted only from the measurement requirements in the Standard.
Some of the scope is as follows:-
1. raw material (material in use)
2. work in process (work being in process)
3. finished goods (goods which are prepared for using)
The Standard does not apply to the measurement of inventories of producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realizable value in accordance with well-established industry practices. The previous version of IAS 2 was amended to replace the words 'mineral ores' with 'minerals and mineral products' to clarify that the scope exemption is not limited to the early stage of extraction of mineral ores.
COST FLOW ASSUMPTIONS:-
1. Average-cost method
2. First in - first out method
3. Last in – last out method...
The following item should not be include in inventory cost:-
Abnormal waste
Storage costs
Selling costs
Interest costs etc
Fair value:-
The amount for which an asset could be saved or liability could be settled.
Write down the net realizable value (NRV):-
It is the estimated which the company’s estimate in the ordinary working of the business. Less the cost of completion this estimated cost should be there to make sale any nrv must be an expense in the period which the written down occur. Any reversal can be recognized in the income statement of the business in the same period which the reveal occurs.
DISCLOSURE:-
Accounting policy for inventories. Carrying amount, generally classified as merchandise, supplies, materials, work in process and finished goods· g amount, generally classified as merchandise, supplies, materials, work in process and finished goods. The classification depends on what is appropriate for entity…
Carrying amount of any inventories at fair value less cost to sell
Amount of any reversal of a write down to NRV and the circumstances that led to such reversal
Amount of any write-down of inventories recognized as an expense in the period
Carrying amount of inventories pledged as security for liabilities
Cost of inventories recognized as expense (cost of goods sold). IAS 2 acknowledges that some enterprises classify income statement expenses by nature ( material, labor and so on ) rather than by functions (CGS selling expense and so on ). Accordingly, as an alternative to disclosing cost of goods sold expense, IAS 2 allows an entity to disclose operating costs recognised during the period by nature of the cost (raw materials and consumables, labour costs, other operating costs) and the amount of the net change in inventories for the period).
Definition:-
IAS defines entries and specifies requirement for the recognition of and entry as an expense or as an asset the measurement of inventories and disclosures about inventories.
Reasons for Revising IAS 2 :-
The International Accounting Standards Board developed this revised IAS 2 as part of its project on Improvements to International Accounting Standards. The project was undertaken in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the project were to reduce or eliminate alternatives, redundancies and conflicts within the Standards, to deal with some convergence issues and to make other improvements.
SCOPE:-
The Standard clarifies that some types of inventories are outside its scope while certain other types of inventories are exempted only from the measurement requirements in the Standard.
Some of the scope is as follows:-
1. raw material (material in use)
2. work in process (work being in process)
3. finished goods (goods which are prepared for using)
The Standard does not apply to the measurement of inventories of producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realizable value in accordance with well-established industry practices. The previous version of IAS 2 was amended to replace the words 'mineral ores' with 'minerals and mineral products' to clarify that the scope exemption is not limited to the early stage of extraction of mineral ores.
COST FLOW ASSUMPTIONS:-
1. Average-cost method
2. First in - first out method
3. Last in – last out method...
The following item should not be include in inventory cost:-
Abnormal waste
Storage costs
Selling costs
Interest costs etc
Fair value:-
The amount for which an asset could be saved or liability could be settled.
Write down the net realizable value (NRV):-
It is the estimated which the company’s estimate in the ordinary working of the business. Less the cost of completion this estimated cost should be there to make sale any nrv must be an expense in the period which the written down occur. Any reversal can be recognized in the income statement of the business in the same period which the reveal occurs.
DISCLOSURE:-
Accounting policy for inventories. Carrying amount, generally classified as merchandise, supplies, materials, work in process and finished goods· g amount, generally classified as merchandise, supplies, materials, work in process and finished goods. The classification depends on what is appropriate for entity…
Carrying amount of any inventories at fair value less cost to sell
Amount of any reversal of a write down to NRV and the circumstances that led to such reversal
Amount of any write-down of inventories recognized as an expense in the period
Carrying amount of inventories pledged as security for liabilities
Cost of inventories recognized as expense (cost of goods sold). IAS 2 acknowledges that some enterprises classify income statement expenses by nature ( material, labor and so on ) rather than by functions (CGS selling expense and so on ). Accordingly, as an alternative to disclosing cost of goods sold expense, IAS 2 allows an entity to disclose operating costs recognised during the period by nature of the cost (raw materials and consumables, labour costs, other operating costs) and the amount of the net change in inventories for the period).
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