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    Pas 2

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    Princess Jullyn Claudio
    This document summarizes PAS 2, which provides guidance on inventories. It defines inventories as assets held for sale, in production, or in the form of materials used in production. Inventories must be measured at the lower of cost or net realizable value. Cost includes purchase price, conversion costs, and other costs to bring inventories to their present location and condition, but excludes abnormal waste and selling costs. Specific identification, FIFO, and weighted average cost formulas can be used to determine inventory costs. Certain inventories related to agriculture and broker-traders use alternative measurements.

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    Pas 2

    Uploaded by

    Princess Jullyn Claudio
    10 views14 pages
    This document summarizes PAS 2, which provides guidance on inventories. It defines inventories as assets held for sale, in production, or in the form of materials used in production. Inventories must be measured at the lower of cost or net realizable value. Cost includes purchase price, conversion costs, and other costs to bring inventories to their present location and condition, but excludes abnormal waste and selling costs. Specific identification, FIFO, and weighted average cost formulas can be used to determine inventory costs. Certain inventories related to agriculture and broker-traders use alternative measurements.

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    PAS-2

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    This document summarizes PAS 2, which provides guidance on inventories. It defines inventories as assets held for sale, in production, or in the form of materials used in production. Inventories must be measured at the lower of cost or net realizable value. Cost includes purchase price, conversion costs, and other costs to bring inventories to their present location and condition, but excludes abnormal waste and selling costs. Specific identification, FIFO, and weighted average cost formulas can be used to determine inventory costs. Certain inventories related to agriculture and broker-traders use alternative measurements.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    10 views14 pages

    Pas 2

    Uploaded by

    Princess Jullyn Claudio
    This document summarizes PAS 2, which provides guidance on inventories. It defines inventories as assets held for sale, in production, or in the form of materials used in production. Inventories must be measured at the lower of cost or net realizable value. Cost includes purchase price, conversion costs, and other costs to bring inventories to their present location and condition, but excludes abnormal waste and selling costs. Specific identification, FIFO, and weighted average cost formulas can be used to determine inventory costs. Certain inventories related to agriculture and broker-traders use alternative measurements.

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    PAS 2

    INVENTORIES
    INVENTORIES

     Determination of cost to be recognized


    as asset and carried forward until it is
    expensed

     Provides guidance in the determination


    of cost of inventories, including the use
    of cost formula, and their subsequent
    measurement and recognition as
    expense
    InventoriesMeasurement

    1. Lower of Cost

    2. Net realizable value


    PAS 2 applies to all inventories
    except for the following:
    Assets accounted for under the other
    standards:

    a. Financial instruments (PAS 32 and


    PFRS 9)

    b. Biological assets and agricultural produce


    at the point of harvest (PAS 41)
    PAS 2 applies to all
    inventories except for the
    following:
    a. Inventories of producers of agricultural,
    forest, and mineral products measured
    at net realizable value in accordance
    with well-established practices in those
    industries

    b. Inventories of commodity broker-traders


    measured at fair value less cost to sell
    Inventories are as assets:

    a. Held for sale in the ordinary course of business


     (finished goods)

    b. In the process of production for such sale (work in


    process);

    c. In the form of materials or supplies to be consumed in the


    production process or in the rendering of services (raw
    materials and manufacturing supplies)
    Inventories

     Ordinary course of business – necessary, normal or usual


    business activities of a business entity.

     MEASUREMENT is measured at the lower of cost and


    net realizable value
    COST

    a. Purchase Cost – purchase price, import duties, non-


    refundable purchase taxes, transport, handling, and
    other costs directly attributable to the acquisition of the
    inventory.

    b. Conversion costs – costs of converting raw materials that


    includes direct labor and manufacturing overhead

    c. Other costs – necessary in the bringing the inventories to


    present location and condition
    The following are excluded from the cost of
    inventories and are expensed in the period in
    which they are incurred:

    a. Abnormal amounts of wastes materials, labor or other


    production costs;

    b. Storage costs, unless those costs are necessary in the


    production process before a further production stage

    c. Administrative overheads that do not contribute to


    bringing inventories to their present location and
    condition; and

    d. Selling costs
    Cost Formulas
     PAS 2 provides the following cost formulas
     Cost formulas deal with the computation of cost of inventories that are
    charged as expense when the related revenue is recognized as well as the
    cost of unsold inventories that are recognized as asset.
    1. Specific identification – not interchangeable inventories
    2. First-in, first out method (FIFO) – inventories produced and purchased
    first are sold first, the unsold would be the most recent produced and
    purchased
    3. Weighted Average – cost of sales and ending inventory are determined
    based on wiweighted average cost of beginning inventory and other
    produced and purchased during the period
    First-in, first out (FIFO)
    Method
     Step 1: Compute for endjng inventory in units

     Step 2: Compute for ending inventory at cost.

     Step 3:. Compute for cost of sales


    Weighted Average Method

     Step 1 : total goods availanle for sale

     Step 2 : compute for weighted average unit cost

     Step 3 : compute for ending inventory cost


    Net realizable value vs Fair
    Value
     Net realizable value presented as estimated selling
    price minus estimated cost of completion minus
    estimated cost necessary to make the sale

     Fair value reflects price at which an orderly transaction


    to sell the same inventory in the principal market for
    that inventory would take place between market
    participants
    Reference:

    Conceptual Frameworks and


    Accounting Standards , 2019 Ed. By
    Zeus Vernon B. Millan

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