IAS 2 highlighted inventory valuation. Normally, inventory should be valued at cost. But abnormal situation, inventory should be valued lower of cost and net realisable value (NRV).
Inventory cost should include purchase cost, import duty, transportation cost, etc…
Net Realisable Value should measure estimated selling price less estimated cost to complete and cost to sell.
For manufacturing industry, IAS 2 allowed to used absorption costing for inventory valuation.
IAS 2 allow First In First Out (FIFO) method and Weighted Average Valuation method.
When the market price of inventory will be stable, Weighted Average method can be used.
When the price of inventory was fluctuated, FIFO method more appropriate.
When the business carry out physical count to verify the existence, there can two ways.
(1) Periodic inventory counting and (2) Continuous inventory counting
Most of the supermarket usually adopt continuous inventory counting system to control the inventory existence.