IAS 2

IAS 2 gives the accounting treatment for inventories. This includes the issues in the recognition of costs and also gives guidance one the assessment of NRV.

The cost of inventories comprises of: costs of purchase, other costs incurred in bringing the inventories to their present location and condition, and costs of conversion. (As a note - carriage inwards should be included, but not carriage outwards)

Costs of conversion can include variable and fixed costs ie with regards to…