IAS 2 Example

Richard Clarke

IAS 2: Inventories

Valuation at the Lower of Cost and Net Realisable Value (NRV)


Scenario

aCOWtancy Ltd has 1,000 units of Product MooMilk in stock at year-end.

Let’s calculate the value to be shown in the financial statements under IAS 2.


Costs Incurred

  • Purchase cost per unit = £10.00
  • Import duties per unit = £1.00
  • Transport to warehouse = £0.50
  • Admin costs = £0.20(excluded)
  • Selling costs = £0.30 (used only for NRV)

Total Cost per unit = £10.00 + £1.00 + £0.50 = £11.50
Total cost = 1,000 × £11.50 = £11,500


Selling Price Forecast (NRV)

  • Selling price per unit = £12.00
  • Less selling costs = £0.30

NRV per unit = £11.70
NRV total = 1,000 × £11.70 = £11,700


✅ Final Valuation

BasisValue
Cost£11,500
NRV£11,700
IAS 2 Inventory Value£11,500 ✅ (Lower of cost and NRV)

We use cookies to help make our website better. We'll assume you're OK with this if you continue. You can change your Cookie Settings any time.

Cookie SettingsAccept