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CA Final · Financial Reporting · Ind AS 2 Inventories

Sutlej Retail Ltd, a Ind AS reporting company, prepares its statement of profit and loss. Which statement about the presentation of expenses in relation to inventories is correct under Ind AS?

Ind AS requires only nature-wise classification of expenses. The function-wise option available in IAS 1 has been removed, so the related IAS 2 paragraph was deleted in Ind AS 2 and an entity cannot choose to present cost of sales by function.

  1. AExpenses may be presented either by nature or by function, at the entity's choice
  2. BInd AS 2 requires only nature-wise classification, since the function-wise option in IAS 1 has been removedCorrect
  3. CCost of goods sold must always be shown separately by function
  4. DOnly inventory write-downs are shown by nature; other expenses are shown by function

Explanation

The Ind AS 2 comparison with IAS 2 notes that the IAS 2 paragraph on function-wise expense recognition is deleted because the option to classify expenses by function has been removed and Ind AS 1 requires only nature-wise classification. The other options assume a function-wise choice, which Ind AS does not permit.

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