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Important Stuff on Ind AS 2, Inventories

Indian Accounting Standard (Ind AS) 2, Inventories, Important Material

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Ind AS 2: Inventories

Inventories are assets:
(a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

In case of service providers, inventories include the cost of service for which the entity has not yet recognised the revenue.

Inventories shall be 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 of completion and the estimated costs necessary to make the sale. It refers to the net amount that an entity expects to realise from the sale of inventory in the ordinary course of business.


(a) The objective of this Standard is to prescribe the accounting treatment for inventories.
(b) A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised.
(c) This Standard deals with the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value.
(d) It also provides guidance on the cost formulas that are used to assign costs to inventories.


This Standard applies to all inventories, except:
(a) financial instruments ;
(b) biological assets related to agricultural activity and agricultural produce at the point of harvest;

This Standard does not apply to the measurement of inventories held by:
(a) producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realisable value in accordance with well-established practices in those industries. When such inventories are measured at net realisable value, changes in that value are recognised in profit or loss in the period of the change.
(b) Commodity broker-traders who measure their inventories at fair value less costs to sell. When such inventories are measured at fair value less costs to sell, changes in fair value less costs to sell are recognised in profit or loss in the period of the change.

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