Under IAS 2, how is inventory measured?

Under IAS 2, how is inventory measured?

• A. At cost.
• B. At cost or NRV, whichever is lower.
• C. At NRV.
• D. At cost or NRV, whichever is higher.

Answer: (B)

Under IAS 2, inventory is measured at the lower of cost and net realizable value. Cost includes the purchase price plus any costs to bring the inventory to its present location and condition. Net realizable value is the estimated selling price in the ordinary course of business minus the estimated costs of completion and the costs to sell. If NRV falls below cost, the inventory is written down to NRV, with the loss recognized in profit or loss. If NRV is higher than cost, the carrying amount stays at cost. This approach prevents overstating assets when the inventory cannot be sold for its cost. For example, if a product cost is 100 but NRV is 85, the carrying amount is 85.

Under IAS 2, inventory is measured at the lower of cost and net realizable value. Cost includes the purchase price plus any costs to bring the inventory to its present location and condition. Net realizable value is the estimated selling price in the ordinary course of business minus the estimated costs of completion and the costs to sell. If NRV falls below cost, the inventory is written down to NRV, with the loss recognized in profit or loss. If NRV is higher than cost, the carrying amount stays at cost. This approach prevents overstating assets when the inventory cannot be sold for its cost. For example, if a product cost is 100 but NRV is 85, the carrying amount is 85.