Refers to the amount that an entity expects to realise from the sale of inventory in the ordinary course of business.

It 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 measurement date.

Reflects the price at which an orderly transaction to sell the same inventory in the principal market for that inventory would take place betweenparticipants at the measurement date.

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

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.

The cost of purchase of inventories comprises the purchase price, import duties and other taxes, and transport, handling and other costs directly attributed to the acquisition of FG, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.

Cost of Conversion of invenotries includes costs directly related to the units of production, such as direct labour and direct material.
Any costs incurred with respect to converting RM to FG.
includes a systematic allocation of fixed and variable overheads which were incurred when converting RM to FG.

Fixed production Overheadsare those indirect costs of production that remains relatively constant regardless of the volume of production.

Allocation is based on normal capacity - it is not the actual units produced or how much the factory can produce at full capacity; but it is the amount of units the factory can produce after taking into consideration stoppages to its production arising from normal circumstances.

These costs do not change - remain constant - irrespective of the level of production.

Variable Production Overheads are indirect costs of production that vary directly with the volume of production.

They cannot be directly related to a unit of goods manufactured, but these costs usually not fixed.

If production increased than these overheads would also increase.

Other Costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition.

Once that the goods have arrived at their destination than the company stops recording these costs.

The cost of inventories shall be assigned using the First-In First-Out (FIFO) or Weighted Average Cost (AVCO) Formula.

An entity shall use the same cost formula for all inventories having a similar nature and just to the entity.

For inventories with different nature and use, different cost formulas may be justifiable.

The accounting polices adopted in measuring inventories, including the cost formula used.

The total carrying amount if inventories and the carrying amount in classification appropriate to the entity.

The carrying amount of inventories carried at fair value during the period

The amount of inventories recognised as an expense during the period.

The amount of any write-down inventories recognised a a reduction in the amount of inventories recognised as an expense in the period.

The circumstance or events that led to the reversal of a write-down of inventories.

The carrying amount of inventories pledge as security for liabilities.

In the form of materials or supplies to be consumed in the production process or in the rendering of services

States that 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"

The cost of inventory items should be ascertained "by using specific identification of their individual costs"

FIFO - assumes that inventory items which are purchased or produced first are sold or used first, so that the items remaining at the end of an accounting period are those recently purchased/produced

AVCO - involves computing a new weighted average cost per item after each acquisition takes place. The cost is then calculated by using the most recently-computed weigthed average cost per item.

it is generally not a reliable representation of actual inventory flows.

A specific costing approach which reflected the physical flow of items in these circumstances would not be ruled out purely because it gave similar results to LIFO

Definition - estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.