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IAS 2 Inventories Exam Questions & Answers 2024/2025
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IAS 2 Inventories Exam Questions & Answers 2024/2025 True - ANSWERSThe objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related rev...

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  • September 7, 2024
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  • 2024/2025
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IAS 2 Inventories Exam Questions &
Answers 2024/2025

True - ANSWERSThe objective of this Standard is to prescribe the accounting treatment for inventories. A
primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried
forward until the related revenues are recognised.



par. 1



True - ANSWERSThis Standard provides guidance on the determination of cost and its subsequent
recognition as an expense, including any write-down to net realisable value. It also provides guidance on
the cost formulas that are used to assign costs to inventories.



par. 1



False - ANSWERSThis Standard applies to all inventories, except:



(a) biological assets related to agricultural activity and agricultural produce at the point of harvest (see
IAS 41 Agriculture).



par. 2



True - ANSWERSThis Standard does not apply to the measurement of inventories held by:

(a) producers of agricultural and forest products, agricultural produce after harvest, and minerals and
mineral products, to the extent that they are measured at net realisable value in accordance with
well-established practices in those industries. When such inventories are measured at net realisable
value, changes in that value are recognised in profit or loss in the period of the change.

(b) commodity broker-traders who measure their inventories at fair value less costs to sell. When such
inventories are measured at fair value less costs to sell, changes in fair value less costs to sell are
recognised in profit or loss in the period of the change.

, par. 3



False - ANSWERSThe inventories referred to in paragraph 3(a) are measured at net realisable value at
certain stages of production. This occurs, for example, when agricultural crops have been harvested or
minerals have been extracted and sale is assured under a forward contract or a government guarantee,
or when an active market exists and there is a negligible risk of failure to sell. These inventories are
included only in the measurement requirements of this Standard.



par. 4



False - ANSWERSBroker-traders are those who buy or sell commodities for others or on their own
account. The inventories referred to in paragraph 3(b) are principally acquired with the purpose of selling
in the near future and generating a profit from fluctuations in price or broker-traders' margin. When
these inventories are measured at net realisable value, they are excluded from only the measurement
requirements of this Standard.



par. 5



True - ANSWERSInventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of
services.



par. 6



False - ANSWERSNet realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion.



par. 6

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