IAS 2 INVENTORIES : RECOGNITION AS AN EXPENSE

12. RECOGNITION AS AN EXPENSE

When inventories are sold, the carrying amounts of the inventories are recognised as an expense in the period that the revenue is recognised.

Any write-down or reversal of write down of inventories to net realisable value is recognised as an expense immediately it is incurred.

Any inventory transferred to other asset accounts, such as parts of self-constructed property, are recognised and expensed over the useful life of that asset.

Example: inventory transferred to property, plant and equipment You sell air-conditioning equipment. You build a new factory and use $80.000 of your inventory in its construction. You will depreciate the factory over 20 years, and should depreciate the equipment over the same 20-year period.
	I/B	DR	CR
Inventory	B		80.000
Property, plant and equipment	B	80.000
Transfer of inventory to property, plant and equipment
Depreciation	I	4.000
Accumulated depreciation	B		4.000
Annual depreciation of the equipment