Specific identification of costs

Learning objectives

• Determine when specific identification of costs is required (items that are not ordinarily interchangeable, goods or services produced and segregated for specific projects) and why it is inappropriate for large numbers of interchangeable items.L1, L2

Normative references

• IAS 2 §23The cost of inventories of items that are not ordinarily interchangeable, and of goods or services produced and segregated for specific projects, is assigned by using specific identification of their individual costs.
• IAS 2 §24Specific identification of cost means that specific costs are attributed to identified items of inventory; it is appropriate for items that are segregated for a specific project, regardless of whether they have been bought or produced. It is inappropriate when there are large numbers of items of inventory that are ordinarily interchangeable, because the method of selecting the items that remain in inventories could then be used to obtain predetermined effects on profit or loss.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

8 questions

• The cost of inventory items that are not ordinarily interchangeable is assigned by specific identification of their individual costs.L1
• For which of these inventories must cost be assigned by specific identification?L1
• Chantiers Navals d'Iroise is considering the specific identification of costs. Which statements are correct?L2
• Automobiles Ardoise sells used vehicles, each identified by its serial number and acquired at a price negotiated individually with private sellers. To simplify inventory record-keeping, its finance director proposes measuring all vehicles at weighted average cost. Which position should be taken?L2
• Quincaillerie Bastide holds 2 million identical bolts bought at different prices during the year. It may apply specific identification and designate as sold the batches bought at the lowest price in order to improve its profit.L2
• Helioterra buys 500 standard solar panels. On receipt, 120 of them are labelled and segregated in an area reserved for the construction of a solar plant ordered by a specific customer; the other 380 join the general inventory, where they are mixed with previous deliveries. How should the cost of these panels be assigned?L2
• Bijouterie Saint-Amand holds unique pieces made by designers, each acquired at its own price, as well as standard silver chains bought by the thousand at varying prices. Which approach to assigning cost complies with IAS 2?L2
• Why is specific identification inappropriate for an inventory comprising a large number of items that are ordinarily interchangeable?L1