At what cost should I recognised the value of my company’s inventory ?
IAS 2, also known as International Accounting Standard 2, focuses on the valuation of inventory.
It mandates that companies value their inventory at the lower of cost or net realizable value:
– Cost includes the purchase price, direct costs, and specific overheads.
– Net realizable value is determined by subtracting the estimated selling price from any anticipated costs of completion and selling expenses.
The primary objective of IAS2 is to ensure that inventory is reflected at a prudent value on the balance sheet, preventing any potential overstatement of assets. Furthermore, it offers guidance on cost formulas like FIFO (First-In, First-Out) and weighted average cost, which aim to enhance consistency and comparability in financial reporting
To know more –> https://www.ifrs.org/issued-standards/list-of-standards/ias-2-inventories/