Inventories (IAS 2) Inventories consist of the following: Held for sale in ordinary course of business (finished goods).

In the process of production of such sale (raw material and WIP) In the form of materials or supplies to be consumed in production process or in rendering of services (stores, spares and raw material, consumables). Inventories does not include machinery. Spares which can be used only in connection with an item of fixed asset and those whose use is irregular , such machinery spare parts are accounted in accordance with accounting for fixed assets. Fundamental Principle Inventories are required to be stated at the lower of cost and net realizable value (NRV)

Cost should include all; Costs of purchase (including taxes, transport, and handling) net of (trade discount received and duty drawback). Costs of conversion (including fixed and variable manufacturing overheads) and Other costs incurred in bringing the inventories to their present location and conditions. Exclusion from the cost: Abnormal cost Storage cost Administrative overheads Selling and distribution cost Interest and Borrowing cost

Cost formula Specific identification is used method is used when purchase of item is specifically segregated for the project. When specific identification is not followed FIFO and weighted average can be used.
Write-Down to Net Realizable Value

NRV is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. Any write-down to NRV should be recognized as an expense in the period in which the write-down occurs

Disclosure in the financial statement: Accounting policy adopted in measuring inventories . Cost formula used Classification of inventories like finished goods, WIP and Raw material and carrying amount