IAS 2: Inventories

Valuation at the Lower of Cost and Net Realisable Value (NRV)

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Scenario

aCOWtancy Ltd has 1,000 units of Product MooMilk in stock at year-end.

Let’s calculate the value to be shown in the financial statements under IAS 2.

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Costs Incurred

• Purchase cost per unit = £10.00
• Import duties per unit = £1.00
• Transport to warehouse = £0.50
• Admin costs = £0.20 ❌ (excluded)
• Selling costs = £0.30 (used only for NRV)

Total Cost per unit = £10.00 + £1.00 + £0.50 = £11.50
Total cost = 1,000 × £11.50 = £11,500

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Selling Price Forecast (NRV)

• Selling price per unit = £12.00
• Less selling costs = £0.30

NRV per unit = £11.70
NRV total = 1,000 × £11.70 = £11,700

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✅ Final Valuation

Basis	Value
Cost	£11,500
NRV	£11,700
IAS 2 Inventory Value	£11,500 ✅ (Lower of cost and NRV)

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