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Chapter 5
Methods of calculating the cost of
inventory
IAS 2 Inventories outlines acceptable methods of determining cost, including specific
identification (in some cases), first-in first-out (FIFO) and weighted average cost.
For inventory items that are not interchangeable, specific costs should be attributed
to each individual items of inventory.
For items that are interchangeable, IAS 2 permits use of the FIFO or weighted
average cost methods to determine the cost of inventory. The last in, first out (LIFO)
method of inventory valuation is no longer permitted.
The same cost method should be used for all items of inventory with similar
characteristics as to their nature and use to the entity.
Tutor notes guidance – discussion points
Take students through Illustration 3 from Chapter 6 of the Study Text to
demonstrate before they attempt TYU 9.
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