Inventory consists of resources intended for sale in the ordinary course of business, resources in production and materials used in production. It may include raw materials, work in progress and finished goods. Under IFRS, inventory measurement considers cost and net realizable value; a fall in expected economic benefit may require a write-down.
Example
If a store buys seasonal clothing but demand is weaker than expected, some of the goods will remain in the warehouse. Physical possession does not mean that the goods can still be sold at the original price. The costs of bringing them to sale and expected discounts matter when measuring the balance.
How to interpret the balance
For an investor, distinctions between goods in transit, safety stock and seasonal inventory are useful explanations, but they do not replace an overall assessment of inventory quality. A large balance may support supply resilience or tie up money in products that customers do not want. Inventory should be compared with sales, turnover and impairment disclosures.
General financial concepts; not an individual recommendation under Russian jurisdiction.
Source reference retained: report-ias2. Related links retained: /guides/inventory-and-depreciation/, /glossary/metody-ocenki-zapasov/, /glossary/oborachivaemost-zapasov/. The raw-material, work-in-progress, finished-goods, IFRS, cost, net-realizable-value, write-down, seasonal-clothing, weak-demand, original-price, selling-cost, discount, goods-in-transit, safety-stock, turnover and impairment-disclosure caveats are preserved.
Educational material is not individual investment, legal or tax advice.
