IAS 2 Inventories | International Accounting | International Financial Reporting Standards I

How do you account for inventories under IAS 2? In this international accounting lecture, Professor Farhat explains the IFRS inventory standard, including which costs are included in inventory, the cost formulas permitted under IFRS, measurement at the lower of cost or net realizable value, and the reversal of write-downs. CPA candidates and accounting students will learn the key IFRS versus US GAAP differences — core FAR exam material. Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students. Video Timeline & Key Concepts: 0:00 — Introduction 0:50 — Definition and scope of inventories 1:53 — Determining inventory cost: purchase and conversion costs 3:45 — Costs excluded from inventory 11:06 — Cost formulas: FIFO, weighted-average, and no LIFO 13:16 — Measurement at lower of cost or net realizable value 14:08 — Write-downs and reversals under IFRS Frequently Asked Questions: What costs are included in inventory under IAS 2? Inventory cost includes purchase costs such as price, duties, and transport, conversion costs such as direct labor and a systematic allocation of production overhead based on normal capacity, and other necessary costs like design. What costs are excluded from inventory? Costs that do not help bring inventory to its present location and condition are excluded, such as abnormal waste, most storage costs, administrative overhead, and selling costs. Which cost formulas does IFRS allow? IFRS permits FIFO and weighted-average methods and strictly forbids LIFO. Specific identification is required for unique, non-interchangeable items. Can inventory write-downs be reversed under IFRS? Yes. Unlike US GAAP, IFRS allows the reversal of a previous inventory write-down if the selling price later increases, provided the new carrying amount does not exceed the original cost. Is this tested on the CPA exam? Yes. IAS 2 inventories are tested in the FAR section, which covers IFRS differences. #CPAexam #CMAexam #enrolledagentexam #accountingcourses #collegecourses #courses #FAR #IFRS #IAS2 #inventories #internationalaccounting #ProfessorFarhat