Financial Accounting and Reporting An International Approach
Quiz 7: Inventory
Ias 2 Requires That Fixed Manufacturing Costs Be Excluded from the Cost
IAS 2 requires that fixed manufacturing costs be excluded from the cost of inventories,as they cannot be allocated accurately.
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Standard costs may be used to arrive at the cost of inventory only where standards are set at ideal levels and any costs arising from exceptional wastage are excluded from the cost of inventories.
The value of inventory reported in the financial statements under IAS 2 may be reported at an amount lower than its original cost.
The cost-flow assumption selected for inventory costing purposes should always reflect the physical flow of goods out of inventory.
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