TMI BlogValuation of Inventories - only for AY 2016-17X X X X Extracts X X X X X X X X Extracts X X X X ..... n the provisions of Income Tax Act, 1961 ('the Act') and this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. This Income Computation and Disclosure Standard shall be applied for valuation of inventories, except: (a) Work-in-progress arising under 'construction contract' including directly related service contract which is dealt with by the Income Computation and Disclosure Standard on construction contracts; (b) Work-in-progress which is dealt with by other Income Computation and Disclosure Standard; (c) Shares, debentures and other financial instruments held as stock-in-trade which are dealt with by the Income Computation and Disclosure Standar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... location and condition. Costs of Purchase 5. The costs of purchase shall consist of purchase price including duties and taxes, freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates and other similar items shall be deducted in determining the costs of purchase. Costs of Services 6. The costs of services in the case of a service provider shall consist of labour and other costs of personnel directly engaged in providing the service including supervisory personnel and attributable overheads. Costs of Conversion 7. The costs of conversion of inventories shall include costs directly related to the units of production and a systematic allocation of fixed and variable produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced simultaneously and the costs of conversion of each product are not separately identifiable, the costs shall be allocated between the products on a rational and consistent basis. Where by products, scrap or waste material are immaterial, they shall be measured at net realisable value and this value shall be deducted from the cost of the main product. Other Costs 10. 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. 11. Interest and other borrowing costs shall not be included in the costs of inventories, unless they meet the criteria for recognition of interest as a component of the cost as specified in the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in bringing the items of inventory to their present location and condition. 17. The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or 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 determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. The average shall be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances. Retail Method 18. Where it is impracticable to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the cost, where the finished products in which they shall be incorporated are expected to be sold at or above the cost. Where there has been a decline in the price of materials and it is estimated that the cost of finished products will exceed the net realisable value, the value of materials shall be written down to net realisable value which shall be the replacement cost of such materials. Value of Opening Inventory 22. The value of the inventory as on the beginning of the previous year shall be (i) the cost of inventory available, if any, on the day of the commencement of the business when the business has commenced during the previous year; and (ii) the value of the inventory as on the close of the immediately preced ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
