Objective of the standard

Learning objectives

• Explain the objective of IAS 2: determining the amount of cost of inventories to be recognised as an asset until the related revenues are recognised, its subsequent recognition as an expense, write-downs to net realisable value and cost formulas.L1

Normative references

• IAS 2The Standard prescribes the accounting treatment for inventories, in particular the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. It provides guidance on the determination of cost, its subsequent recognition as an expense (including any write-down to net realisable value) and the cost formulas used to assign costs.

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

8 questions

• IAS 2 sets out the accounting treatment of inventories; the key question it addresses is the amount of cost to be kept as an asset until the revenue related to those inventories is recognised.L1
• IAS 2 deals only with determining the cost of inventories: the subsequent recognition of that cost as an expense, including write-downs to net realisable value, falls under other standards.L1
• The cost formulas used to assign the cost of inventories are not among the topics on which IAS 2 gives guidance.L1
• Write-downs of inventories to net realisable value are among the topics on which IAS 2 gives guidance.L1
• According to the objective of IAS 2, what is the primary issue in accounting for inventories?L1
• Which set summarises the topics on which IAS 2 gives guidance?L1
• A trainee at Ardenval claims that the objective of IAS 2 is to present inventories at their expected selling price. How should this be corrected?L1
• According to the objective of IAS 2, until when is the cost of inventories carried as an asset?L1