The following terms are used in this Standard with the meanings specified:
Inventories are assets:
- Held for sale in the ordinary course of business;
- In the process of production for such sale; or
- In the form of materials or supplies to be consumed in the production process or in the rendering of services.
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.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
You are not expected to demonstrate the depth of knowledge. It is given for the sake of completeness. Even, if you understood the 30% of information given below, it will be enough for passing exam.
This Standard applies to all inventories, except:
- Work in progress arising under construction contracts, including directly related service contracts (IAS 11 Construction Contracts);
- Financial instruments (IAS 32 Financial Instruments: Presentation, IAS 39
- Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments); and
- Biological assets related to agricultural activity and agricultural produce at the point of harvest (IAS 41 Agriculture).
You are not required to learn the Name & Number of Accounting Standards; rather you are expected to understand the accounting treatment prescribed by Accounting Standards.