IAS 2 - Inventory

Question 1

at what cost do we measure inventory?

Answer 1

lower of cost and NRV

Question 2

what is net realisable value?

Answer 2

estimate selling price less costs to sell

Question 3

what else do we include in cost?

Answer 3

all costs to bring it to location and condition for sale

Question 4

what are the accounting methods for inventory?

Answer 4

FIFO
weighted average
specific identification

Question 5

what do we do with trade discounts for inventory?

Answer 5

exclude from cost of inventory

Question 6

what amounts are excluded from cost of inventory?

Answer 6

abnormal waste
storage costs
selling costs

Question 7

when do we calculate weighted average cost of inventory?

Answer 7

either periodically or as each shipment is received

Question 8

trade discount vs. settlement discount?

Answer 8

• trade discount is given when the sale occurs

- settlement discount is given when payment occurs

Question 9

what is mark-up on selling price?

Answer 9

markup is a percentage of selling price

Question 10

what is mark-up on cost price?

Answer 10

markup is a percentage of cost price

Question 11

what do we do if inventory is damaged or obsolete and may need to be impaired?

Answer 11

we write the value down to NRV through COS

Question 12

do we write down the value of raw materials if there is possible impairment?

Answer 12

no, only write down if finished goods cost will be lower than NRV

Question 13

what do we do if there is a reversal to a previous write down of inventory?

Answer 13

we can reverse the impairment, limited to the value of the initial impairment