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Ind AS - 002 - Rules - B. Indian Accounting Standards (Ind AS) - Companies (Indian Accounting Standards) Rules, 2015 - 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 .....

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ogical 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 accordance with well-established practices in those industries. When such are measured at net re .....

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e 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) are principally acquired with the purpose of selling in the near future and generating a profit .....

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rvices. 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 Net realisable value refers to the net amount that an entity expects to realise from the sale o .....

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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. Costs incurred to fulfil a contract with a customer that do not give rise to (or assets within the scope of another Standard) are accounted for in accordance with Ind AS 115, Revenue from Contracts with Customers.] Measurement of 9 shall be measured at th .....

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erials 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 are those indirect costs of production that remain relatively constant r .....

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apacity 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 overheads are recognised as an expense in the period in which they are inc .....

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. 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 this is the case, they are often measured at net realisable value and .....

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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, identifies limited circumstances where borrowing costs are included in the cos .....

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harvested from its biological assets are measured on initial recognition at their fair value less costs to sell at the point of harvest. This is the cost of the at that date for application of this Standard. Techniques for the measurement of cost 21 Techniques for the measurement of the cost of , such as the standard cost method 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, eff .....

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tory that has been marked down to below its original selling price. An average percentage for each retail department is often used. Cost Formulas 10[23. The cost of of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.] 24 Specific identification of cost means that specific costs are attributed to identified items of inventory. This is the appropriate treat .....

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-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all having a similar nature and use to the entity. For with a different nature or use, different cost formulas may be justified. 26 For example, used in one operating segment may have a use to the entity different from the same type 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 .....

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average may be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances of the entity. Net realisable value 28 The cost of may not be recoverable if those are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. The cost of may also 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 .....

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t be practicably evaluated separately from other items in that product line. It is not appropriate to write down on the basis of a classification of inventory, for example, finished goods, or all the in a particular operating segment.] 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 .....

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on general selling prices. Provisions may arise from firm sales contracts in excess of inventory quantities held or from firm purchase contracts. Such provisions 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 materia .....

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value because of changed economic circumstances, the amount of the write-down is reversed (ie the reversal is limited to the amount of the original write-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 a .....

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rs. 35 Some may be allocated to other asset accounts, for example, inventory used as a component of self-constructed property, plant or equipment. allocated 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) t .....

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ragraph 34; and (h) the carrying amount of pledged as security for liabilities. 12[37. Information about the carrying amounts held in different classifications 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.] 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 recog .....

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, 8, 29, 37 are amended. An entity shall apply those amendments when it applies Ind AS 115.] Appendix A References to matters contained in other Indian Accounting Standards This Appendix is an integral part of the Ind AS. This appendix lists the appendix which is a part of another Indian Accounting Standard and makes reference to 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 Surfac .....

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ise classification, has been deleted keeping in view the fact that option provided in IAS 1 to present an analysis of expenses recognised in profit or loss using a classification based on their function within the entity has been removed and Ind AS 1 requires only nature-wise classification of expenses. However, in order to maintain consistency with paragraph numbers of IAS 2, the paragraph number is retained in Ind AS 2. 6[2. Omitted ] 14[2. Following paragraph numbers appear as Deleted in IAS .....

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ated 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. 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. ) Costs inc .....

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ver, it may be appropriate to group similar or related items. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line. It is not appropriate to write down on the basis of a classification of inventory, for example, finished goods, or all the in a particular operating segment. 5. Substituted vid .....

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r to maintain consistency with paragraph numbers of IAS 2, the paragraph numbers are retained in Ind AS 2: (i) Paragraph 2(a) (ii) Paragraph 19. 7. Omitted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, 1[(a) work in progress arising under construction contracts, including directly related service contracts (see Ind AS 11, Construction Contracts);] 8. Substituted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st da .....

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y has not yet recognised the related revenue (see Ind AS 18, Revenue).] 9. Omitted vide F. No. 01/01/2009-CL-V(Part VI) - Dated 28-03-2018, w.e.f. 1st day of April, 2018, before it was read as, 3[19. To the extent that service providers have , they measure them at the costs of their production. 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 rela .....

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