How do you value inventory under IFRS?

How do you value inventory under IFRS?

Under IFRS, inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

What is the valuation rule for inventory?

Inventory valuation is usually a conservative estimate in GAAP and uses a rule called least-of-cost-or-market, or LCM. The LCM rule simply states that when you calculate the value of inventory, you should price lower than either its purchase price or current market value.

What inventory valuation method is not allowed under IFRS?

LIFO in Accounting Standards The inventory valuation method is prohibited under IFRS and ASPE due to potential distortions on a company’s profitability and financial statements. The revision of IAS Inventories in 2003 prohibited LIFO from being used to prepare and present financial statements.

Which IFRS deals with inventory cost?

IAS 2 provides guidance for determining the cost of inventories and the subsequent recognition of the cost as an expense, including any write-down to net realisable value.

How is inventory valuation different under IFRS and GAAP?

IFRS requires that inventory is carried at the lower of cost or net realizable value; U.S. GAAP requires that inventory is carried at the lower of cost or market value. IFRS allows for some inventory reversal write-downs; GAAP does not.

How inventory is valued as per AS 2?

Following are the steps for valuation of inventories: A. Determine the cost of inventories B. Determine the net realizable value of inventories C. On Comparison between the cost and net realizable value, the lower of the two is considered as the value of inventory.