F1 Blog Textbook Tests Test Centre Exams Exam Centre. According to IAS 2, the cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of the inventory is determined by taking the selling price of the cosmetics and reducing it by the gross margin of 65% to arrive at the cost. 3. We are very likely engaged in the audit or job in valuation of inventories. For inventories with different nature or use (for example, certain commodities used in one business segment and the same type of commodities used in another business segment), different cost formulas may be justified. Cost of inventory The cost of inventories is the aggregation of: • costs of purchase (e.g. IAS 2 Inventories 2 Fair value – the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The shortfall is like any other cost that necessarily needs to be incurred to achieve the construction of premium housing and be allocated under IAS 2.12. IAS 2 disclosure requirements: IAS 1 Presentation of Financial Statements require that companies disclose the accounting policies adopted in preparing the financial statements, including those used to account for inventories. This article explores the manner in which property developers’' inventories are costed under IAS 2 when, as a condition of being granted development permission, developers are required to construct public infrastructure and/or affordable housing. This Standard deals with the accounting treatment of Inventories. Q&A: IAS 2 Inventories September 30, 2016. 5.10 If, for example, the developer is publicly committed to a master plan that involves constructing 250 premium houses, typically a relevant portion of the costs of constructing the public infrastructure would be included in all the premium housing inventories, not just the last 150 premium houses. Notes Quiz Objective Test. Classroom Revision Mock Exam Buy $199. 2.1 The objective of IAS 2 is to prescribe the accounting treatment for inventories. Find Jobs. ACCA CIMA CAT DipIFR Search. CIMA F1 lectures Download F1 notes Spread the word. review IAS 2 standard's disclosure requirements. inventory; inventory costing; IAS 2 Inventories, property development; public infrastructure; affordable housing; and incurred in bringing the inventories to their present location and condition. Acowtancy. The standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. Accounting articles about IFRS and ACCA education. LIFO is not permissible under IAS 2. IAS 2 Inventories Objective . IAS 2 provides that an entity should use the same cost formula for all inventories having similar nature and use to the entity. This site uses cookies. Overall IAS 2 touches the following topics: Cost of inventory to be recognized; Cost formula to be used for inventory valuation ... IAS 2 FRS 102 Section 10; ACCA CIMA CPD FIA (ACCA) AAT. Cost includes all the expenditure incurred in bringing the product or service to its present location and condition. May 19, 2013 at 9:29 am. 4.3 In the context of determining net realisable value, IAS 2.29 says (emphasis added): 29 Inventories are usually written down to net realisable value item by item. 4.6 As noted above, public infrastructure is not, of itself, inventory. For example, in the context of IAS 16, the costs of dismantling and removing an item of mining equipment or restoring the site on which it is located are included among the costs incurred in bringing the mining equipment to the location and condition necessary for it to be capable of operating in the manner intended by management [IAS 16.16]. 4.4 In some circumstances, the net realisable value of affordable housing would be assessed as a stand-alone group of inventories and any loss recognised immediately as an expense. The retail method can be used for measuring inventories of the beauty products. Solution Example 2 . This e-learning course is part of an e-learning series designed by PwC Academy Hungary which aims to provide a comprehensive overview of the application of IFRS (IAS) standards to finance and accounting experts who are already familiar with fundamental (local) accounting and reporting processes. This includes: Cost of purchase – material costs, import duties, freight. In some circumstances, however, it may be appropriate to group similar or related items. Virtual classroom support for learning partners. IAS 2 Inventories explained with Ledger Accounts of a Manufacturer; IAS 2 inventories; Inventory (IAS 2) - ACCA (SBR) lectures; CIMA F1 IAS 2 Inventories; IAS 2 Accounting for Inventories; Load more Previous post. This course explains these concepts through practical examples and interim tests to enhance understanding. IAS 2 Inventories defines the items that may be included incomputing the value of an inventory of finished goods manufactured by abusiness. review IAS 2 standard's disclosure requirements. Login; Select Page. cows on a farm even if they are considered inventories all these are dealt with by their specific standards 5.4 Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition [IAS 2.15]. FREE Courses Blog. Job Locations Job Level . Construction contracts (IAS 11) 2. The nature of inventories. Revised December 2003. He works in the Finance Department at Deloitte, Nigeria. This is consistent with the way IAS 16 requires the carrying amounts of property, plant and equipment and inventories to include costs of future dismantling, removal and site restoration, which are accrued over time as construction of the relevant property, plant and equipment and inventories progresses [IAS 16.18]. Register; Log In; CPD IAS 2 - Inventories Enrol The learning outcomes from this CPD accounting standards course include: The requirements on how to account for most types of inventory. The main issues are the determination of the cost of inventory and Net Realizable Value, its subsequent accounting treatment, and the guidance on the cost formulas for the valuation of inventories. CIMA BA1 P1 P2 F1 F2 F3. Cost includes: -Cost of purchase – material costs, import duties, freight. The inventories are measured at lower of cost or NRC (net realizable value). During this session we will be looking into one of the oldest standards IAS 2 Inventories and how to account for most inventories including the valuation and classification of inventories. That is, the shortfall would be a cost attributed to premium housing because both the premium and affordable housing are parts of a wider development that is expected to be profitable. Addresses requirements of IAS 2, Inventories. IAS 2 Inventories contains accounting rules and principles that need to be followed with respect to inventories when financial statements of a company are being prepared according to IFRS.The major requirements of IAS 2 are regarding the determination of cost on initial recognition, the subsequent measurement and the disclosures that need to be given in the financial statements. According to the standard subsequent measurement shall be at the lower of net realisable value and cost. If the costs incurred to construct the first 100 premium house inventories did not include their relevant share of the costs to construct the public infrastructure, their cost would be understated relative to the revenues to be recognised for those first 100 premium houses. LKAS 2 / IAS 2 - Inventories standard for ICASL, AAT, CMA, ACCA, CIMA, A/L and all the academic and professional courses. IAS 2 prescribes the accounting treatment for inventories. Entity can use cost formula like FIFO or Weighted Average to assign cost to the inventories if the goods are interchangeable. Donate. 5.1 IAS 2 requires that the cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition [IAS 2.10]. These would include costs that the developer has no choice but to incur in order to ensure the premium housing can be constructed, such as: (a) the costs of public infrastructure; and. 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