Abstract:
According to the International Accounting Standards
(IAS) No 2, Inventories refer to the tangible property:
a. held for sale in the ordinary course of business.
b. In the process of production of goods and services for
sale c. To be consumed In the production of goods and
services for sale. Thus, inventories connote the stock of raw materials,
finished goods, component parts utilized in the production
process and the items that have begun the production cycle
but yet to complete the process.
Inventories constitute a significant integral portion of a
manufacturing firm's assets, thus the valuation and
presentation of inventories have significant effects on
financial statements or annual accounts of the concerned
firm. Inventory valuation base will affect the firm's financial
position and results of operations. It will also affect the
calculation of current assets and the firm's working capital
and also useful In resolving the firm's solvency/profitability
j tangle. There are many valuation methods approved by
different accounting bodies, such as historical cost net
realizable value, lower of cost, and market value within the
historical cost method, we have various approaches , such as
FIFO, LIFO , Normal Stock, Specific identification, Last
Purchase price with their varying effects on the firm.
This work was conducted as an attempt to critically
evaluate these multiple approved inventory valuation methods
and their consequential effects on financial statements. This
work was carried out, using both primary and secondary data
in order to elucidate this intricate scenario for enhancing the
information al value of annual accounts.
