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

Under Ind AS 2, which pair of cost formulas may be used to assign cost to inventories that are ordinarily interchangeable (other than those dealt with in paragraph 23)?

Ind AS 2 permits the FIFO or the weighted average cost formula for assigning cost to inventories covered by paragraph 25. LIFO is not an allowed formula, so options including LIFO are incorrect under the standard.

  1. AFIFO or weighted average costCorrect
  2. BLIFO or weighted average cost
  3. CFIFO or LIFO
  4. DLIFO or specific identification only

Explanation

Paragraph 25 of Ind AS 2 states that cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. LIFO is not permitted, so any option containing LIFO is wrong.

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