Accounting Standard -2 Valuation Of Inventories (Key Points)

1).The cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred
 in bringing the inventories to their present location and condition.

2). Inventories are valued at lower of cost or net realisable value.

3). Specific identification method is required when goods are not ordinarily interchangeable. In other circumstances, the enterprise may adopt either weighted average cost method or FIFO methods whichever approximates the fairest possible approximisation of cost incurred.

4).Standard Costing Method or Retail Inventory Method can be adopted only as a techniques of

measurement provided where the results of these measurements approximates the results that would be

arrived at after adopting specific identification method or weighted average method or FIFO method as may

be applicable to the circumstances.

5).The financial statements should disclose:

(a) the accounting policies adopted in measuring inventories,including the cost formula used; and

 (b) the total carrying amount of inventories and its classification appropriate to the enterprise.