Meaning and example
Specific identification links the expense and the remaining inventory to the cost of a particular traceable unit. If two unique items cost 80 and 130 and the second is sold, a simple model assigns 130 to the sale rather than the average of the two prices. The method requires reliable records linking the cost to the item. It must not be used to select whichever cost of interchangeable goods is more convenient without a basis in the applicable rules. Testing recoverability and selling expenses remains a separate task.
How to avoid a mistake
This approach is useful for unique equipment held for sale or a separate project when costs are genuinely traceable. One must not choose a desired profit first and then assign a convenient unit to the sale. Documents must make it possible to reconstruct the cost of that exact unit; otherwise, arithmetic precision does not prove that the allocation between expense and inventory is correct.
For more on the relationship between cost and write-downs: [the educational analysis](/guides/inventory-cost-nrv/).
Sources and review boundaries
Support: **report-ias2**. The example is editorial. Sources verify the concept, but do not confirm the reliability of anyone’s financial statements or the suitability of a decision for a particular investor.