If “landed cost” means the IAS 2 inventory-cost view, storage belongs when it is necessary in the production process before another production stage. Handling belongs when it is directly attributable to acquiring the inventory. Neither other storage nor unexplained internal movement qualifies automatically.
IAS 2 therefore draws a distinction between bringing inventory to its present location and condition, maintaining it after that point, and handling that cannot be connected directly to acquisition.
How to classify each cost
| Cost | Treatment under the cited IAS 2 rules | Point to verify |
|---|---|---|
| Acquisition transport | Include when directly attributable to acquiring the inventory | Whether the transport arose specifically from the purchase |
| Acquisition handling | Include when directly attributable to acquiring the inventory | Whether it was part of obtaining the goods, rather than a later warehouse process |
| Storage necessary before another production stage | Include | Whether the storage was necessary in the production process |
| Storage not necessary in the production process | Normally exclude from inventory cost | The actual purpose and timing of the storage |
| Internal handling with no established acquisition link | Do not include automatically | Whether a direct connection to acquisition can be demonstrated |
| Other costs required to bring inventory to its present location and condition | Consider within the broader inventory-cost calculation | Whether the cost meets the relevant IAS 2 category |
IAS 2 includes purchase, conversion and other costs involved in bringing inventory to its present location and condition. Its specific storage rule still applies: storage is excluded unless it is necessary in the production process.
How to check borderline internal handling
A business can apply four checks:
- Identify the activity. Determine whether the cost concerns obtaining the inventory or a later storage, movement or warehouse process.
- Test direct attribution. Ask whether the handling cost arose specifically from acquiring the goods. A general warehouse cost should not be treated as acquisition-related merely because inventory is present.
- Test production necessity. For storage, determine whether it was necessary before another production stage rather than ordinary holding.
- Review the evidence. Purchase records, freight or handling documentation, receiving records and production plans can help establish what happened. The cited standard does not provide an allocation method for every shared internal cost.
A broader management-cost view may still be useful for unit-economics analysis. However, routine storage and internal handling can then be shown as separate operating-cost lines rather than presented as IAS 2 inventory cost.
What the buyer must still confirm
The IAS 2 wording does not resolve every form of internal handling, shared warehouse cost or supplier-specific storage arrangement. Final classification therefore depends on the actual transaction, the purpose of the cost and the business’s applicable reporting basis.
The cited material also does not establish whether a particular supplier charges for storage, when a charge begins, or whether it is refundable. Those points must be confirmed from the actual invoice, supplier terms and other transaction records; none should be assumed.