Additional scope exemption relates to the measurement of inventories by certain producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products or to certain commodity brokers-dealers. See paragraphs IAS 2.3-5 for details.
Definition of inventories
Inventories are assets (IAS 2.6):
- held for sale in the ordinary course of business; or
- in the process of production for such sale; or
- in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Typical examples of inventories include merchandise purchased by a retailer and held for resale, finished goods produced, work in progress being produced or materials and supplies awaiting use in the production process (IAS 2.8).
Costs to fulfil a contract with customers that do not give rise to an asset to be recognised under IAS 2 (or other IFRS) should be accounted for under IFRS 15.
Administrative or office supplies (e.g. printing paper) are not in the scope of IAS 2 as they do not meet the definition set out in IAS 2.6. Most often they are immaterial and therefore expensed in P/L once received, but it is possible to treat them as assets based on internally developed accounting policy in accordance with IAS 8.10-12.
Work-in-progress of a service provider
The introduction of IFRS 15 deleted paragraph IAS 2.19 relating to cost of inventories of a service provider. The deleted paragraph stated that these costs consisted primarily of the labour and other costs of personnel directly engaged in providing the service, including supervisory personnel, and attributable overheads. The fact that this paragraph has been deleted by IFRS 15 implies that service providers should account for their intangible work-in-progress under IFRS 15 as costs to fulfil a contract.
Intangible assets/ PP&E / investment property vs. inventory
See also the discussion on:
- distinguishing some types of assets that are in the scope of IAS 16 from those in the scope of IAS 2
- distinguishing some intangible assets that are in the scope of IAS 38 from those in the scope of IAS 2
- distinguishing rented properties that are in the scope of IAS 40 from those in the scope of IAS 2
Disclosure requirements are set out in paragraphs IAS 2.36-39.
More about IAS 2
See other pages relating to IAS 2: