What are the methods of measurement of inventory

The measurement of inventory includes initial measurement, subsequent measurement of inventory, and closing measurement of inventory. Among the subsequent measurement of inventories, the valuation methods of issued inventories are FIFO method, moving weighted average method, month-end lump sum weighted average method and individual valuation method.

Article 14 of the new Accounting Standard for Business Enterprises (ASBE) No. 1 - Inventories specifies that "An enterprise shall determine the actual cost of issued inventories by using the FIFO method, the moving weighted-average method or the individual valuation method." The elimination of the "LIFO" method of inventory valuation, which is permitted under the current standard, is mainly due to the difference between physical and financial flows.

Inventory valuation methods include the FIFO method, the moving weighted average method, the month-end lump sum weighted average method and the individual valuation method.

(1) First-in, first-out method, is a method that assumes that the inventory received first is issued first or the inventory received first is consumed first, and values issued inventory and ending inventory according to this assumed order of inventory flow.

(2) moving weighted average method, is based on the opening balance of inventory and the current period of income inventory quantity and the cost of entry, the end of the period of the month at a time to calculate the weighted average unit price of inventory, as the calculation of the cost of the current period of inventory issued and the closing balance of the value of the unit price, in order to obtain the cost of the current period of inventory issued and the value of the balance of the inventory of a method.

(3) month-end a weighted average method, is each time after the receipt of goods, immediately after the receipt of goods, based on the number of inventory on hand and the total cost of inventory, calculate a new average unit price or cost of a method.

(4) individual valuation method, is the actual cost of each (batch) revenue inventory as the basis for calculating the cost of each such (batch) issued inventory.