OLD AS - 02 - Valuation of Inventories [Before 30-3-2016]

Valuation of inventories: measure at the lower of cost and net realisable value with prescribed cost composition and disclosures.

Inventories are measured at the lower of cost and net realisable value. Cost comprises costs of purchase, conversion and other costs to bring inventories to present location and condition; purchase costs include price, duties and freight (less recoverable taxes and discounts); conversion costs include direct labour and systematic allocation of fixed and variable production overheads based on normal capacity. Specific identification applies to non-interchangeable items; interchangeable items use FIFO or weighted average. Inventories are assessed for write-down to net realisable value at each balance sheet date and entities must disclose measurement policies and carrying amounts.