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