Lc (letter of credit) charges and inventory
This query is : Open
15 November 2017
Dear all,
As per AS 2 - interest and other borrowing cost are usually excluded from inventory cost. Since LC charges (bank charges) are not part of interest or borrowing cost can it be included in the cost of inventory ?
Considering the following, can it be included in the cost of inventories.
1. LC charges as administrative OH and since it contributes in bringing in the inventory to their present location.
2. LC is incurred (to the extent) to bring in the inventories to their present location
Please help to clarify on this.
Thank you
As per AS 2 - interest and other borrowing cost are usually excluded from inventory cost. Since LC charges (bank charges) are not part of interest or borrowing cost can it be included in the cost of inventory ?
Considering the following, can it be included in the cost of inventories.
1. LC charges as administrative OH and since it contributes in bringing in the inventory to their present location.
2. LC is incurred (to the extent) to bring in the inventories to their present location
Please help to clarify on this.
Thank you
16 November 2017
LC charges are also bank charges they cannot be included in the inventory cost. If you are referring to AS 16 - Borrowing cost and trying to include the LC cost, kindly note that AS -16 is applicable to qualifying asset. In your case inventory is not qualifying asset thus LC charges cannot be included in the inventory cost.
16 November 2017
Many Thanks for the clarification.
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