Inquiries about IAS
Could someone clarify why “Reimbursable import duties from a taxing authority” and “Salary of the purchasing manager in the accounts department” are deemed incorrect? I understand that the import tax will be reimbursed, but I still believe it should be considered a cost. Additionally, I feel that a portion of the purchasing manager’s salary should be allocated to purchasing costs since they are involved in acquiring inventory.
Regarding the second image, I was unable to locate the statement “Inventories can be allocated to other asset accounts” in IAS 2. Could anyone provide insights on this?
One response
Regarding your questions about IAS (International Accounting Standards) and specifically IAS 2, let’s clarify both points:
Reimbursable import duties from a taxing authority: While it may seem reasonable to consider reimbursable import duties as a cost, IAS 2 explicitly requires that only costs that are directly attributable to bringing the inventory to its present location and condition be included in the cost of inventories. If the import duties are reimbursable, they would not be considered a cost to the entity because they will not be ultimately borne by the entity. Therefore, they should not be included in the inventory cost under IAS 2.
Salary of the purchasing manager in the accounts department: Generally, costs that directly relate to the purchase of inventory should be included in inventory costs. However, the salary of the purchasing manager may not be directly attributable to inventory if it is categorized as common costs or administrative expenses rather than directly related to purchasing. IAS 2 focuses on costs that are directly connected to bringing the inventory to its condition and location, and unless the purchasing manager’s salary is directly linked to a specific inventory transaction, it would typically not be included in the cost of inventory.
Inventories being allocated to other asset accounts: Regarding your difficulty finding the statement about inventories being allocated to other asset accounts in IAS 2, it’s worth noting that IAS 2 primarily focuses on inventory treatment and valuation. It does allow for inventory to be recognized as an expense when it is sold but does not specifically mention the allocation of inventory to other asset accounts. If you are looking for specific references, it might be helpful to review the definitions and scope sections of IAS 2 more thoroughly, as well as the relevant guidance notes.
If there are further details or examples you would like to discuss, feel free to share!