Page 93 - F3 -FA Integrated Workbook STUDENT 2018-19

Inventory

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 not 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.

Illustrations and further practice

Now try TYU 6 & TYU 7 from Chapter 6 of the Study Text

87