IAS 2Chapter 7Lesson 1
Recognising inventories as an expense and disclosures
Step 1 of 8Learning objectives
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Inventory becomes an expense in step with the revenue it generates: on sale, its carrying amount is expensed; write-downs and losses are expenses of the period in which they occur; reversals reduce the expense; inventory built into an item of property, plant and equipment constructed by the entity becomes an expense through that asset's depreciation. The notes report all of this: policies, carrying amounts by category, amount expensed, write-downs, reversals and their circumstances, inventories pledged as security.
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Learning objectives
- Explain when the carrying amount of inventories becomes an expense (sale, write-downs, losses, reversals).
- Calculate cost of sales and the amount of inventories recognised as an expense for a period, separating the transfer to property, plant and equipment.
- Record cost of sales and the transfer of inventories to an asset under construction.
- Identify the disclosures required for inventories and prepare the corresponding note.