Ias 2 flow chart

Importance of IAS 2 (Inventories)

1. IAS 2 – INVENTORIES












To
































Inventories
Finished goods Work in process Raw materials
Measurement
Cost NRV
Lower of
Cost of
purchase
Cost of
conversion
Cost directly
attributable
Fixed on normal
capacity
Variable
on actual
Joint
allocated
By
product
deducted
Techniques Formulas
Standard Retail Job Order Process
FIFO AVCO
Recognition
In case inventories:
damaged
partially or
wholly obsolete
selling price
declined
cost to complete
declined

Write-down to NRV
Raw material will be
written down to NRV only
if the finished goods NRV
is also less than its cost.
Write-down will be
reversed when NRV
exceeds cost again.
As an expense:
on sale
on write-down
As an asset:
On allocation to
other asset

To bring to
present
location and
NRV = Estimated selling price – estimated cost to sell
In case of firm contract = Use contract price – cost to sell
In case of raw material = Use replacement cost