Skip to content

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

Which statement about the use of cost formulas under Ind AS 2 is correct?

An entity must apply the same cost formula to all inventories having a similar nature and use. Different formulas can be justified only for inventories of a different nature or use, not merely for geographical location or differing tax rules.

  1. AInventories in different countries may use different formulas merely because of different tax rules
  2. BAn entity must use the same formula for all inventories having a similar nature and use to itCorrect
  3. CAn entity may choose a different formula for each batch of identical items
  4. DWeighted average may be applied only on a periodic basis

Explanation

Ind AS 2 requires the same cost formula for all inventories of similar nature and use. A difference in geographical location or tax rules alone does not justify different formulas. The weighted average may be computed periodically or on receipt of each shipment, so the last option is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Inventories (Ind AS 2) shows your real accuracy, how long you take and where you lose marks.

Practise Inventories (Ind AS 2)Free diagnostic mock

More Inventories (Ind AS 2) questions