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CA Final · Financial Reporting · Ind AS 2 Inventories

Under Ind AS 2, which statement correctly describes the elements making up the cost of inventories?

Under Ind AS 2, cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. It is therefore wider than just the purchase price or the conversion cost alone.

  1. ACost comprises costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and conditionCorrect
  2. BCost comprises only the purchase price paid to the supplier
  3. CCost comprises costs of purchase and conversion but excludes any other costs of bringing inventories to their present condition
  4. DCost comprises only the costs of conversion incurred in the factory

Explanation

Paragraph 10 states that the cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The options limiting cost to purchase price, or excluding other costs, or covering only conversion, contradict this wording.

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