Under IAS 2, the same cost formula is generally applied to inventories that:
Correct answer: A. Have similar nature and use to the entity
- A. Have similar nature and use to the entity
- B. Are held in separate storage buildings
- C. Were purchased from different suppliers
- D. Were acquired in different accounting years
Explanation
Inventories with a similar nature and use normally receive the same cost formula for consistency. Different locations, suppliers or purchase years do not by themselves justify using different formulas.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
Practise Inventory Valuation
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