CFA Level I: Cost of Inventories

With the IFRS, the costs of inventories include purchase costs, conversion costs and transport costs. Purchase costs include duties, insurance, handling, shipping and any other costs of acquisition of the inventory. Volume discounts like rebates reduce the price paid of purchase.

Costs of conversion are related to management of the inventories, like labor and overhead costs. If these costs are included in the cost of inventories, they cannot be expensed with costs of goods sold. Any abnormal costs are storage costs are expensed, not included in the cost of inventories asset.

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