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Chapter 7 PAS 2 - INVENTORIES, Menger Simon Pino - Coggle Diagram
Chapter 7 PAS 2 - INVENTORIES
SCOPE
:check:Applies to to all inventories, except:
:red_cross:Work in progress arising under construction contracts (covered by PAS 11)
:red_cross:Financial instruments (covered by PAS 39)
DEFINITION OF INVENTORIES
:star:Includes:
:checkered_flag:
Finished goods
: Assets held for sale in the ordinary course of business.
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Work in process:
Assets in the production process for sale in the ordinary course of business.
:checkered_flag:
Raw materials and supplies
: Materials and supplies consumed in the production process.
:recycle:Measurement
:red_flag:
lower of cost and net realisable value (NRV)
.
:no_entry:Impairment Loss
:forbidden:If the NRV of an item of inventory falls below its cost, an impairment loss must be recognized. This loss is recognized as an expense in the income statement.
COST OF INVENTORIES
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Conversion costs
: Costs directly attributable to the conversion of materials into finished goods, including labor and production overheads.
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Other costs
: Costs incurred in bringing the inventories to their present location and condition, excluding abnormal waste, storage costs, administrative overheads, and selling costs.
:!:
Purchase cost
: Purchase price, import duties, and other taxes, net of trade discounts, rebates, and similar items.
COST FORMULAS
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First-in, first-out (FIFO)
: Assumes that the first items purchased or produced are the first items sold or used.
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Weighted average cost
: Calculates the average cost of all similar items available for sale during the period.
:explode:
Specific identification
: Identifies the specific costs associated with each individual item of inventory.
:explode:
NRV
is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Menger Simon Pino
Group 7
9:00-10:30
BSA - 1