CIMA BA3 Syllabus C. PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES - IASB requirements - Notes ^{15 / 20}

IAS 2 lays out the required accounting treatment for inventories under the historical cost system.

The major area of contention is the cost value of inventory to be recorded.

This is recognised as an asset of the enterprise until the related revenues are recognised (i.e. the item is sold) at which point the inventory is recognised as an expense (i.e. cost of sales).

Part or all of the cost of inventories may also be expensed if a write-down to net realisable value is necessary.