The Measurement Rule for Inventories, Mandated by IAS 2 Inventories

question 27

Multiple Choice

The measurement rule for inventories, mandated by IAS 2 Inventories, is:

• A) lower of fair value and selling price;
• B) lower of cost and net realisable value;
• C) higher of initial cost and realisable value;
• D) higher of completion costs and replacement costs.

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Definitions:

FIFO Method

"First In, First Out," an inventory management and valuation method where goods produced or acquired first are sold or used first.

Ending Inventory

The value or quantity of goods available for sale at the end of an accounting period, calculated to determine the cost of goods sold.

Fire Screens

Protective devices placed in front of fireplaces to prevent sparks and embers from escaping into the room.

Average Cost Method

An inventory costing method where the cost of goods sold and ending inventory is determined based on the average cost of all similar items in inventory.