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TMI BlogICDS II : Valuation of InventoriesX X X X Extracts X X X X X X X X Extracts X X X X ..... Share debentures and other financial instruments held as stock-in-trade (ICDS VIII) Producers inventories of livestock, agriculture and forest products mineral oils, ores and gases to the extent that they are measured at net realisable value. Machinery spares, which can be used only in connection with a tangible fixed asset and their use is expected to be irregular (ICDS V) Note: (a) Items of inventory that have not been used in the construction work and have not become part of work-in progress of the contract will come within the scope of this ICDS and should be included as part of the inventory to be valued as per the requirements of this ICDS. (b) Provisions of ICDS II shall not apply to securities held as inventor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service not fully rendered need not be computed under this ICDS. 6. Costs of conversion:- Costs of conversion are incurred for converting raw material into finished products. These costs can be classified into three categories: costs that are directly related to the units of production variable production overheads and fixed production overheads 7. Other Costs:- Other costs shall be included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. Generally, interest or other borrowing costs are not included in the cost of inventory. However, ICDS provides that if the inventory item meets the criterion for recognition of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically produced and segregated for specific project. Where there are a large numbers of items of inventory which are ordinarily interchangeable, specific identification of costs shall not be made. Note: Under specific identification of cost, specific costs are attributed to identified items of inventory. 10. First-in First-out and Weighted Average Cost Formula ICDS II recognises that inventory valuation involves the process of approximation and estimation. Cost of inventories, other than the inventory dealt with in paragraph 2.3.7.1, shall be assigned by using the First-in First-out (FIFO), or weighted average cost formula. The formula used shall reflect the fairest possible approximation to the cost incurred in bringing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e percentage used takes into consideration inventory, which has been marked down to below its original selling price. 12. Net Realisable Value:- Cost of inventory determined in accordance with ICDS should be compared with the NRV and lower of the two should be taken as the value of the inventory. ICDS requires that the comparison of cost and NRV should be done on item-by item basis and not globally. Where items of inventory' relating to the same product line having similar purposes or end uses and are produced and marketed in the same geographical area and cannot be practicably evaluated separately from other items in that product line, such inventories shall be grouped together and written down to net realisable value on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that in case of dissolution of a partnership firm, an association of persons or a body of individuals, the inventory on the date of dissolution shall be valued at the NRV. This is irrespective of the fact whether or not on dissolution the business of the entity is discontinued. 15. Disclosure:- The following aspects shall be disclosed, namely:- the accounting policies adopted in measuring inventories including the cost formulae used. Where Standard Costing has been used as a measurement of cost, details of such inventories and a confirmation of the fact that standard cost approximates the actual cost; and the total carrying amount of inventories and its classification appropriate to a person. - Manuals - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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