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CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)

Under Ind AS 2, inventories are required to be measured at:

Inventories are measured at the lower of cost and net realisable value. This ensures that assets are not carried above the amount expected to be realised from their sale or use. Higher-of rules, cost alone, or replacement cost are not the basis prescribed by Ind AS 2.

  1. AThe lower of cost and net realisable valueCorrect
  2. BThe higher of cost and net realisable value
  3. CCost, without any reference to net realisable value
  4. DReplacement cost at the reporting date

Explanation

Ind AS 2 requires inventories to be measured at the lower of cost and net realisable value. Using the higher figure or ignoring NRV would overstate assets, and replacement cost is not the general measurement basis.

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