| When talking about inventory accounting | | | | purpose. The adjusted selling price may be used in |
| software, barring a few exceptions, inventories | | | | retail business or in businesses where the |
| should be valued lower than historical cost or net | | | | inventory comprises items whose costs are not |
| realizable value. The exceptions are the | | | | readily ascertainable. Adjusted selling price method |
| inventories of consumable stores, by-products, | | | | is also used by some manufacturing organizations |
| reusable waste and non-reusable waste. | | | | for valuing the inventory of finished products held |
| For the purpose of comparing historical cost with | | | | against forward sale contracts. |
| net realizable value, each item in the inventory | | | | The standard cost method of valuing inventories |
| may be dealt with separately, or similar items | | | | may be used if the results approximate |
| may be dealt with as a group. The historical cost | | | | consistently with results obtained in accordance |
| of inventories should normally be determined by | | | | with FIFO, average cost or LIFO formula. |
| using the FIFO (first in first out), average cost or | | | | Overheads, other than production overheads, |
| LIFO (last in first out) formula. | | | | should be included as part of the inventory cost |
| The specific identification method may be used | | | | only to the extent to placing inventories in their |
| for inventories of items that are not ordinarily | | | | present location and condition. |
| interchangeable or for goods manufactured and | | | | The accounting policy adopted for the valuation of |
| earmarked for a specific purpose. Under the | | | | inventories, including the cost formula used, should |
| specific identification method, specific costs are | | | | be disclosed in the financial statements. |
| identified with goods segregated for a specific | | | | |