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ACCA Applied Skills · Financial Reporting · Inventories and agriculture

Which of the following costs should be EXCLUDED from the cost of inventories under IAS 2 Inventories?

Storage costs of finished goods awaiting sale are excluded from inventory cost and expensed, because they are not necessary to bring the inventory to its present location and condition. Duties, inward transport and normal-capacity fixed production overheads are all included.

  1. AImport duties paid on purchased raw materials that are not recoverable
  2. BFixed production overheads allocated on the basis of normal capacity
  3. CStorage costs of finished goods held awaiting sale, where storage is not part of the production processCorrect
  4. DTransport costs incurred in bringing raw materials to the factory

Explanation

IAS 2 excludes storage costs (unless necessary in the production process before a further stage), abnormal waste, administrative overheads and selling costs. Non-recoverable import duties, normal-capacity fixed overheads and inward transport are all included in cost.

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