inventory in service providers

Question

IAS 2 says that inventory of a service provider can include labour cost incurred to provide the service. IAS 18 says that revenue should be recognized based on the stage of completion. So how can we have labour as inventory when we recognize relevant income and expense (labour cost)?

Answer 1

As I understand your question, recognition of revenue based on the stage of completion is one aspect and the recognition of the relevant cost of sales is another aspect. Stage of completion can be decided on many methods as given in IAS 18.24. Even if you do not recognize labour cost so far incurred as inventories, you will have to consider it as WIP in deciding the profit of the project. Note that IAS 2.37 says "The inventories of a service provider may be described as work in progress"