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Doubt in IAS-2 & Interim Dividend in IFRS

CA Yogesh (Sr. Executive (F&A)) (213 Points)

08 June 2012

Dear members concerned,

I want to ask few doubts in IFRS.

1) Where will the Interim Dividend paid recorded in Financial Statements (whether P/L or OCI).?

2) IAS-2 : Whether Inventory Valuation now will include FIXED COST of Production for valuation purpose. I find the same adjustment in ICAI's Module , but didnot find it in the standard ??

Thanks in advance...

Regards,

CA. Yogesh Raghani

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3 Replies

shankar (CA, CS Final) (243 Points)
Replied 09 June 2012

Dear Yogesh

Answer of Q. no. 1

The following amounts may also be presented on the face of the statement of changes in equity, or they may be presented in the notes: [IAS 1.107]

amount of dividends recognised as distributions, and
the related amount per share

As per Companies Act 1956 - Dividend includes interim Dividend

Answer of Q. No. 2

If you read the para 12 of IAS 2 then you will find that FIXED COST of Production is the part of Inventory cost.

Para12. The costs of conversion of inventories 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 regardless of the volume of production, such as depreciation and maintenance of factory buildings and equipment, and the cost of factory management and administration. Variable production overheads are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labour.

Para 13. The allocation of fixed production overheads to the costs of conversion 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 overheads are recognised as an expense in the period in which they are incurred. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased so that inventories are not measured above cost. Variable production overheads are allocated to each unit of production on the basis of the actual use of the production facilities.

14. A production process may result in more than one product being produced simultaneously. This is the case, for example, when joint 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 this is the case, they are often measured at net realisable value and this value is deducted from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost.