Inventories (IAS 2)


Inventories are assets held for sale; or in the process of production for sale; or in the form of materials or supplies to be consumed in the production process or in the rendering of services. 6

Net realizable value is the selling price less any necessary costs for sale. 6

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See IFRS 13 Fair Value Measurement.) 6

Measurement of inventories

Inventories shall be measured at the lower of cost and net realisable value. 9

The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. 10

The costs of conversion of inventories include costs directly related to the units of production, such as direct labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. 12