10 Questions
IAS 2 provides guidance on the cost formulas used to assign costs to inventories. These cost formulas include all of the following except
Last-in first-out (LIFO)
According to IAS 2, inventories should be measured at
The higher of cost and net realisable value
The objective of IAS 2 is to prescribe the accounting treatment for
Inventories
IAS 2 applies to annual periods beginning on or after
1 January 2005
Inventories include assets held for sale in the ordinary course of business, such as
All of the above
Which of the following is NOT considered an inventory according to IAS 2?
Assets held for investment purposes
Which of the following costs should be included in the calculation of inventory cost according to IAS 2?
Purchase cost and conversion costs
Under IAS 2, what is the basis for allocating fixed overheads to inventory?
On a systematic and consistent basis
According to IAS 2, how should inventories be measured?
At the lower of cost or net realizable value
What is the objective of IAS 2?
To prescribe the accounting treatment for inventories
Study Notes
IAS 2 Guidance on Inventories
- IAS 2 provides guidance on cost formulas used to assign costs to inventories, excluding some formulas.
Measurement of Inventories
- Inventories should be measured at the lower of cost and net realizable value (NRV).
Objective of IAS 2
- The objective of IAS 2 is to prescribe the accounting treatment for inventories.
Applicability of IAS 2
- IAS 2 applies to annual periods beginning on or after a specified date.
Definition of Inventories
- Inventories include assets held for sale in the ordinary course of business, such as goods or materials to be sold.
Exclusions from Inventories
- The following are NOT considered inventories according to IAS 2:
- Land and buildings held for sale in the ordinary course of business.
Inventory Cost Calculation
- The following costs should be included in the calculation of inventory cost according to IAS 2:
- Purchase costs, conversion costs, and other costs incurred in bringing the inventories to their present location and condition.
Allocation of Fixed Overheads
- The basis for allocating fixed overheads to inventory is based on the normal capacity of production.
Measurement Basis
- Inventories should be measured at the lower of cost and net realizable value (NRV).
Test your knowledge of IAS 2 Inventories with this quiz. Learn about the requirements for accounting for inventory and measurement methods.
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