Specific identification method
The specific identification method costs inventory by tracing the actual purchase cost of each individual unit sold, used for unique, high-value items like vehicles or jewellery.
FrameworkIAS 2
See it move
A dealer holds three vehicles: Car A cost €18,000, Car B cost €22,000, Car C cost €25,000, totalling €65,000 available for sale. Car A and Car C are sold, so cost of goods sold is their own actual cost, 18,000 plus 25,000, or €43,000, leaving Car B's own €22,000 cost as closing inventory — 43,000 plus 22,000 equals 65,000.
The formula
Variables
- Cost of goods sold (€)
- Actual purchase cost of unit i (€)
- Set of units sold in the period
Each sold unit contributes its own actual cost to cost of goods sold, not an assumed or averaged cost.
Check yourself
A jeweller holds three unique diamond rings: Ring X cost €4,500, Ring Y cost €6,200 and Ring Z cost €3,800. During the month, Ring Y and Ring Z are sold. Using the specific identification method, what is cost of goods sold for the month?