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

Under Ind AS 2, which pair of cost formulas may an entity use to assign cost to ordinary interchangeable inventories?

The permitted cost formulas under Ind AS 2 are FIFO and weighted average cost. LIFO is not allowed, and neither is the base stock method, so the only correct pairing is FIFO with weighted average cost for assigning the cost of ordinary inventories.

  1. AFIFO and LIFO
  2. BFIFO and weighted average costCorrect
  3. CLIFO and weighted average cost
  4. DWeighted average cost and base stock method

Explanation

Ind AS 2 permits only the first-in, first-out and weighted average cost formulas for inventories that are not specifically identified items. LIFO is not permitted, so every option containing LIFO is wrong. The base stock method is also not an allowed formula.

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