IAS 2 Inventories
International Accounting Standard 2
Overview of IAS 2
- Issued: in 1975; re-issued in 1993 and 2003
- Effective date: 1 January 2005
- What it does:
- It prescribes the accounting treatment for inventories;
- It gives guidance on determining the cost of inventories and their subsequent recognition as an expense;
- It prescribes the measurement rules including the net realizable value
- It gives guidance on the cost formulas (FIFO and weighted average).
Articles about IAS 2
- How to Account for Spare Parts? - this article explains whether the item shall be presented as an inventory or a property, plant and equipment
- How to Account for Free Assets Received under IFRS - if you ever received free inventories as a gift or in some other transaction, here's the guidance on how to account for them.
- IAS 2 Cost Formulas: Weighted Average, FIFO or FOFO?! - you will learn to apply different cost formulas on an illustrative example, plus a very funny story!
- Accounting for Discounts under IFRS - this article discusses the accounting for discounts including receiving free inventories.
Questions and Answers
- How to account for commodity contracts to buy inventories with future delivery (own use)? - are these contracts accounted for as derivatives? Or just as future purchases of inventories?
- How to account for barter transactions? - learn what to do when you swap inventories or similar items with your counterparty
- How to allocate cost of conversion to inventories at abnormal level of production? - example clearly illustrates the allocation concept.
- How to account for investment gold? - this Q&A explains accounting for gold by entities other than brokers and commodity dealers.
- Testing goods: inventories, expense or PPE? - how to recognize goods used for testing purposes by the customers?
- Journal entries – finished goods - when you produce finished goods from raw materials, labour and other items, what are the journal entries to reflect that?
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