IAS 2 INVENTORIES : COSTS OF PURCHASE

4. COSTS OF PURCHASE

These comprise the purchase price, transport and handling costs. Taxes and import duties are included, unless they can be reclaimed from the authorities. Trade discounts and rebates are deducted from the costs.

Example: supplier rebate You are an importer. At the end of each year, you receive a rebate equal to 5% of your total purchases from your supplier. Inventory is valued on the basis of: -Transport costs to your premises -Import duties relating to the goods. -Supplier rebate
	I/B	DR	CR
Inventory	I		25.000
Cash (from supplier)	B	25.000
Reduction of inventory costs to reflect rebate