IAS 2Chapter 2Lesson 1
What is inventory? Net realisable value and the measurement principle
Step 1 of 8Learning objectives
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Recognise inventory (an item for sale, in production, or to be consumed), distinguish net realisable value, which is entity-specific, from fair value less costs to sell, and apply the IAS 2 measurement principle: the lower of cost and net realisable value, never above cost.
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Learning objectives
- Recognise inventory from the three situations in the definition and classify an entity's inventories by category.
- Distinguish net realisable value, which is entity-specific, from fair value less costs to sell.
- Explain the measurement principle: the lower of cost and net realisable value.
- Calculate the amount retained for each item and the resulting write-down.