Analysis of the Application of IAS 2 Inventories in Financial Reporting

Abstract

The primary objective of this article is to examine the theoretical framework and practical implementation principles of inventories within the scope of Turkish Accounting Standard TAS2. As one of the most dynamic components of current assets, inventories play a vital role in determining a firm’s profit–loss structure and conducting liquidity analysis. This study adopts a descriptive and analytical methodology and is approached from a perspective consistent with International Financial Reporting Standards (IAS/IFRS). The findings indicate that valuing inventories at the lower of cost and net realizable value is critically important in preventing the overstatement of assets in accordance with the prudence principle. In addition, the allocation of production costs and their impact on operating profit are analyzed in depth. The study evaluates the FIFO and Weighted Average Cost methods, particularly with regard to their effects on financial statements in inflationary environments. The results demonstrate that the careful determination of net realizable value at the end of each reporting periods serves as a mechanism to prevent the deferral of unrealized losses to future periods. Ultimately, the accurate and comprehensive application of IAS 2 standards not only enhances the transparency of financial statements but also strengthens the international comparability of financial information.