IAS 2 Consumption of Inventories by a service organisation

Date recorded:


The issue related to the consumption of inventories by a service entity, in particular the assessment of net realisable value when the inventory is consumed as part of the service rendered. For example, cellular phone companies give subscribers free handsets in exchange for a fixed-term supply contract.


Decision not to add

March 2004



The IFRIC noted that the same issues existed for commercial entities.  The IFRIC concluded that this matter was one of assessing the recoverability of an asset without a direct cash flow.  The IFRIC agreed that such entities use inventory to generate a future revenue stream.  As such, they should be accounted for similar to other items of inventory.


IFRIC reference: IAS 2

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