The Accounting Standard 2 describes the Valuation of Inventory of a company. All companies need to value there stock or inventory.

According to the standard Valuation of Inventory means that the inventory should be valued at lower of cost or net realisable value.

Inventory includes:

1) Finished Goods

2) Work in progress

3) Raw Materials

Inventory does not includes:

1) WIP in construction business

2) WIP of service business

3) Shares, debentures and other financial stock

4) Livestock

There are different methods to calculate the value of inventory like First in First out (FIFO), Last in Last out (LIFO), Weighted Average Cost (WAC).

According to Accounting Standards a firm must follow a single method throughout its business life for calculating the inventory value to maintain consistency. However the method may be changed if needs arises or there is a change in government policy and the firm needs to give a footnote for the same.