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Ind AS - 002 - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 002 - Indian Accounting Standard (Ind AS) 2 (This Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles.) Objective 1 The objective of this Standard is to prescribe the accounting treatment for . A primary issue in accounting for is the amount of cost to be recognised as an asset and carried forward unt .....

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, Financial Instruments: Presentation and Ind AS 109, Financial Instruments and ); and (c) biological assets (ie living animals or plants) related to agricultural activity and agricultural produce at the point of harvest (See Ind AS 41, Agriculture). 3 This Standard does not apply to the measurement of held by: (a) producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products, to the extent that they are measured at net realisable value in a .....

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le value at certain stages of production. This occurs, for example, when agricultural crops have been harvested or minerals have been extracted and sale is assured under a forward contract or a government guarantee, or when an active market exists and there is a negligible risk of failure to sell. These are excluded from only the measurement requirements of this Standard. 5 Broker-traders are those who buy or sell commodities for others or on their own account. The referred to in paragraph 3(b) .....

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orm of materials or supplies to be consumed in the production process or in the rendering of services. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Ind AS 113, Fair Value Measurement.) 7 .....

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[8. encompass goods purchased and held for resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. also encompass finished goods produced, or work in progress being produced, by the entity and include materials and supplies awaiting use in the production process. In the case of a service provider, include the costs of the service, as described in paragraph 19, for which the entity has not yet recognised the related reven .....

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costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. Costs of conversion 12 The costs of conversion of include costs directly related to the units of production, such as direct labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads ar .....

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is based on the normal capacity of the production facilities. Normal capacity is the production expected to be achieved on average over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. The actual level of production may be used if it approximates normal capacity. The amount of fixed overhead allocated to each unit of production is not increased as a consequence of low production or idle plant. Unallocated over .....

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products are produced or when there is a main product and a by-product. When the costs of conversion of each product are not separately identifiable, they are allocated between the products on a rational and consistent basis. The allocation may be based, for example, on the relative sales value of each product either at the stage in the production process when the products become separately identifiable, or at the completion of production. Most by-products, by their nature, are immaterial. When .....

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tomers in the cost of . 16 Examples of costs excluded from the cost of and recognised as expenses in the period in which they are incurred are: (a) abnormal amounts of wasted materials, labour or other production costs; (b) storage costs, unless those costs are necessary in the production process before a further production stage; (c) administrative overheads that do not contribute to bringing to their present location and condition; and (d) selling costs. 17 Ind AS 23, Borrowing Costs, identifi .....

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ction. These costs consist primarily of the labour and other costs of personnel directly engaged in providing the service, including supervisory personnel, and attributable overheads. Labour and other costs relating to sales and general administrative personnel are not included but are recognised as expenses in the period in which they are incurred. The cost of of a service provider does not include profit margins or non-attributable overheads that are often factored into prices charged by servi .....

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thod or the retail method, may be used for convenience if the results approximate cost. Standard costs take into account normal levels of materials and supplies, labour, efficiency and capacity utilisation. They are regularly reviewed and, if necessary, revised in the light of current conditions. 22 The retail method is often used in the retail industry for measuring of large numbers of rapidly changing items with similar margins for which it is impracticable to use other costing methods. The co .....

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n of their individual costs. 24 Specific identification of cost means that specific costs are attributed to identified items of inventory. This is the appropriate treatment for items that are segregated for a specific project, regardless of whether they have been bought or produced. However, specific identification of costs is inappropriate when there are large numbers of items of inventory that are ordinarily interchangeable. In such circumstances, the method of selecting those items that remai .....

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pe of used in another operating segment. However, a difference in geographical location of (or in the respective tax rules), by itself, is not sufficient to justify the use of different cost formulas. 27 The FIFO formula assumes that the items of inventory that were purchased or produced first are sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. Under the weighted average cost formula, the cost of each item is d .....

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o not be recoverable if the estimated costs of completion or the estimated costs to be incurred to make the sale have increased. The practice of writing down below cost to net realisable value is consistent with the view that assets should not be carried in excess of amounts expected to be realised from their sale or use. 4[29. are usually written down to net realisable value item by item. In some circumstances, however, it may be appropriate to group similar or related items. This may be the ca .....

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ng price is charged. Therefore, each such service is treated as a separate item.] 30 Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, of the amount the are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. 31 Estimates of net realisable .....

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ovisions are dealt with under Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. 32 Materials and other supplies held for use in the production of are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value. In such circumst .....

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down) so that the new carrying amount is the lower of the cost and the revised net realisable value. This occurs, for example, when an item of inventory that is carried at net realisable value, because its selling price has declined, is still on hand in a subsequent period and its selling price has increased. Recognition as an expense 34 When are sold, the carrying amount of those shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write- .....

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ed to another asset in this way are recognised as an expense during the useful life of that asset. Disclosure 36 The financial statements shall disclose: (a) the accounting policies adopted in measuring , including the cost formula used; (b) the total carrying amount of and the carrying amount in classifications appropriate to the entity; (c) the carrying amount of carried at fair value less costs to sell; (d) the amount of recognised as an expense during the period; (e) the amount of any write- .....

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ions of and the extent of the changes in these assets is useful to financial statement users. Common classifications of are merchandise, production supplies, materials, work in progress and finished goods. The of a service provider may be described as work in progress.] 38 [Refer Appendix 1] 39 An entity adopts a format for profit or loss that results in amounts being disclosed other than the cost of recognised as an expense during the period. Under this format, the entity presents an analysis o .....

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o Ind AS 2, . 1 Appendix A, Intangible Assets-Web site Costs, contained in Ind AS 38, Intangible Assets. 2 Appendix B, Stripping Costs in the Production Phase of a Surface Mine, contained in Ind AS 16, Property, Plant and Equipment Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 2 and the corresponding International Accounting Standard (IAS) .....

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tain consistency with paragraph numbers of IAS 2, the paragraph number is retained in Ind AS 2. 6[2. Omitted ] - Notes:- 1. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, (a) [Refer Appendix 1] 2. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, 8 encompass goods purchased and held for resale including, for example, merchandise purchased by a retailer and held for resale, or land and other property held for resale. als .....

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