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