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Cfas Pas 2

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Sheinna Mae Von Calupig
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26 views19 pages

Cfas Pas 2

Uploaded by

Sheinna Mae Von Calupig
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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W O R K & ACCOU

A M E NTIN
F R GS
A L TA
U

PAS 2
P T ND
C E AR
N DS
O
C

INVENTORIES
SURCO, PARCASIO, SARMIENTO, ABALO
Learning Objectives

Define inventories.

Measure inventories and apply the cost


formulas.

State the accounting for inventory write-down


and the reversal thereof.
Inventories are assets:
1 Held for sale in the ordinary course of business
(Finished Goods);
In the process of production for such sale
2
(Work In Process); or

In the form of materials or supplies to be


3 consumed in the production process or in the
rendering of services (Raw materials and
manufacturing supplies).
PAS 2 applies to all INVENTORIES
except:
1 Financial Instruments (PFRS 9 & PAS 32)

2 Biological Assets and Agricultural Produce at


the point of harvest (PAS 41)
FINANCIAL STATEMENT
PRESENTATION
ALL ITEMS THAT MEET THE DEFINITION OF AT
M

1
INVENTORY ARE PRESENTED ON THE STATEMENT xx
x xx
x xx

OF FINANCIAL POSITION AS ONE LINE ITEM UNDER


THE CAPTION "INVENTORIES." THE BREAKDOWN OF
THIS LINE ITEM (AS FINISHED GOODS, WIP, AND
RAW MATERIALS) IS DISCLOSED IN THE NOTES.

INVENTORIES ARE NORMALLY PRESENTED


2 IN A CLASSIFIED STATEMENT OF
FINANCIAL POSITION AS CURRENT ASSETS.
AT
M

xx
x
xx
x
xx
Measurement
Inventories are measured at
1 the lower of cost or net
realizable value (NRV).
Measurement
2 The cost of inventories comprise all
costs of purchase, costs of
conversion and other costs
incurred in bringing the inventories
to their present location and
condition.
Measurement
Net realizable value (NRV) is the
3
estimated selling price in the
ordinary course of business less the
estimated costs of completion and
the estimated costs necessary to
make the sale.
Costs that are EXPENSED when
incurred
1. ABNORMAL AMOUNTS OF WASTED
MATERIALS, LABOR OR OTHER
PRODUCTION COSTS.

2. SELLING COSTS, FOR EXAMPLE,


ADVERTISING AND PROMOTION COSTS
AND DELIVERY EXPENSE OR FREIGHT OUT.
Costs that are EXPENSED when
incurred
3. ADMINISTRATIVE OVERHEADS THAT DO NOT CONTRIBUTE
TO BRINGING INVENTORIES TO THEIR PRESENT LOCATION
AND CONDITION.

4. STORAGE COSTS, UNLESS THOSE COSTS ARE NECESSARY


IN THE PRODUCTION PROCESS BEFORE A FURTHER
PRODUCTION STAGE, (E.G., THE STORAGE COSTS OF PARTLY
FINISHED GOODS MAY BE CAPITALIZED AS COST OF
INVENTORY, BUT THE STORAGE COSTS OF COMPLETED
FINISHED GOODS ARE EXPENSED).
Costs that are EXPENSED when
incurred

WHEN A PURCHASE TRANSACTION EFFECTIVLY CONTAINS A


FINANCING ELEMENT, SUCH AS WHEN PAYMENT OF THE
PURCHASE PRICE IS DEFFERED, THE GIFFERENCE BETWEEN
THE PURCHASE PRICE FOR NORMAL CREDIT TERMS AND THE
AMOUNT PAID IS RECOGNIZED AS INTEREST EXPENSE OVER
THE PERIOD OF THE FINANCING
Cost Formulas
1. Specific identification - shall
be used for inventories that are
not ordinarily interchangeable
(i.e., used for inventories that
are unique). Cost of sales is the
cost of the specific inventory
that was sold.
Cost Formulas
2. FIFO-cost of sales is based
on the cost of inventories that
were purchased first.
Consequently, ending
inventory represents the cost
of the latest purchases.
Cost Formulas
3. Weighted Average Cost the
period. cost of sales is based on
the average cost of all
inventories purchased during
➤ Wtd. Ave. Cost = (TGAS in
pesos TGAS in units)
Write down of
inventories
Inventories are If the cost of an
usually written inventory exceeds
down to net its NRV, the
realizable value inventory is written
on an item by item down to NRV, the
basis. lower amount. The
excess of cost over
NRV represents the
amount of write-
down.
Reversal of
write-downs
The amount of reversal
to be recognized
should not exceed the
amount of the original
write-down previously
recognized.
Recognition as an expense

The carrying amount of an inventory that


is sold is charged as expense (1.e., cost of
sales) in the period in which the related
revenue is recognized. Likewise, the
write-down of inventories to NRV and all
losses of inventories are recognized as
expense in the period the write-down or
loss occurs.
LCNRV
Thank you for listening!

PAS 2 INVENTORIES
Don't hesitate to ask any questions!

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