Introduction to IAS 2 inventories and valuation methods and disclosures

In this lesson

1. 0:00 Inventory and biological assets overview
2. 1:22 What is inventory and initial measurement
3. 2:41 Costs included in inventory valuation
4. 3:27 Worked example: calculating total inventory cost
5. 5:17 Net realisable value explained
6. 7:03 Worked example: lower of cost and NRV
7. 11:17 Valuation methods: FIFO and weighted average
8. 13:04 Inventory disclosures in financial statements

About this lesson

You'll explore what costs to include (purchase price, import duties, delivery, conversion costs) and what to exclude (selling costs, storage, abnormal waste), then work through practical examples showing how to value different inventory items and handle write-downs. This is essential knowledge for the Financial Reporting and Strategic Business Reporting papers, where inventory valuation appears regularly in both objective tests and case study scenarios. The session also covers the two main valuation methods for homogenous inventory: first in, first out (FIFO) and weighted average cost (AVCO). You'll understand when to use actual unit cost for non-interchangeable items and how to apply each method consistently. The final part of the session outlines the key disclosures required in the financial statements—your accounting policy, measurement basis, carrying amount, and any write-downs—so you know what information needs to be presented and why it matters to users of the accounts.

Duration: 14m