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Ind AS 2-Inventories

Ind AS 2 provides guidance on the recognition, measurement, and disclosure of inventories in the financial statements of an entity. It applies to all inventories, except for certain financial instruments and biological assets related to agricultural activities.

Key aspects of Ind AS 2 includes:

  1. Measurement: Inventories should be measured at the lower of cost and net realizable value. Cost includes all costs directly attributable to bringing the inventories to their present location and condition.
  2. Cost Formulas: The standard provides guidance on the methods to be used in determining the cost of inventories, such as the first-in, first-out (FIFO), weighted average cost, and specific identification methods. The chosen cost formula should reflect the flow of goods in the specific circumstances of the entity.
  3. Net Realizable Value: If the net realizable value of inventories is lower than their cost, the inventories should be written down to their net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
  4. Disclosure: The standard requires disclosure of the accounting policies adopted for inventories, carrying amounts of inventories, amounts of any write-downs, and the circumstances that led to such write-downs.

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