In: Accounting
Provide the history, overview and objective of the standard that provides guidance on the measurement and recognition of inventory.
IAS 2 — Inventories
Overview
IAS 2 Inventories contains the requirements on how to account for several types of inventory. The standard requires inventories to be measured at the lower of cost and net realisable value and outlines acceptable methods of determining cost, including specific identification, first-in first-out (FIFO) and weighted average cost.
History of IAS 2
Date | Development | Comments |
---|---|---|
September 1974 | Exposure Draft E2 Valuation and Presentation of Inventories in the Context of the Historical Cost System published | |
October 1975 | IAS 2 Valuation and Presentation of Inventories in the Context of the Historical Cost System issued | |
August 1991 | Exposure Draft E38 Inventories published | |
December 1993 | IAS 9 (1993) Inventories issued | Operative for annual financial statements covering periods beginning on or after 1 January 1995 |
18 December 2003 | IAS 2 Inventories issued | Effective for annual periods beginning on or after 1 January 2005 |
Objective of IAS 2
The objective of IAS 2 is to prescribe the accounting treatment for inventories. It provides guidance for determining the cost of inventories and for subsequently recognising an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.