Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

Valuation of inventory

D20BFS036-Harshavardini K.B (7 Points)

09 September 2024

Hello all

If finished good are valued at nrv then raw materials should be valued at replacement cost.

What if RM cost 140 and Replacement cost is 170?

Should we still take 170 for valuation of closing stock of RM?

Reply
Follow
Share

3 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5128 Points)
Replied 12 September 2024

If the finished goods are valued at NRV (Net Realizable Value), then the raw materials should be valued at Replacement Cost. In this case, if the Raw Material (RM) cost is 140 and the Replacement Cost is 170, you should value the closing stock of RM at 170. Here's why: - Replacement Cost is the current market price to replace the RM. - Since the Replacement Cost (170) is higher than the original cost (140), it indicates that the RM's value has increased. - Valuing the closing stock at Replacement Cost (170) reflects the current economic reality and ensures that the financial statements accurately represent the company's financial position. However, if the Replacement Cost were lower than the original cost, you would value the closing stock at the lower value. Remember to consult with a financial expert or refer to relevant accounting standards (e.g., IAS 2 or Ind AS 2) for specific guidance on inventory valuation.

Upgrade to CAclubindia Pro. Subscribe Now!

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5128 Points)
Replied 12 September 2024

If the finished goods are valued at NRV (Net Realizable Value), then the raw materials should be valued at Replacement Cost. In this case, if the Raw Material (RM) cost is 140 and the Replacement Cost is 170, you should value the closing stock of RM at 170. Here's why: - Replacement Cost is the current market price to replace the RM. - Since the Replacement Cost (170) is higher than the original cost (140), it indicates that the RM's value has increased. - Valuing the closing stock at Replacement Cost (170) reflects the current economic reality and ensures that the financial statements accurately represent the company's financial position. However, if the Replacement Cost were lower than the original cost, you would value the closing stock at the lower value. Remember to consult with a financial expert or refer to relevant accounting standards (e.g., IAS 2 or Ind AS 2) for specific guidance on inventory valuation.

D20BFS036-Harshavardini K.B (7 Points)
Replied 13 September 2024

Thank you so much for spending time to resolve the doubt. Means a lot, Now i got clarity about the concept behind it.

Join CCI Pro

Recent Topics

More recent discussions | Post

Related Threads

Popular Discussion

Start a New Discussion

CCI Pro

Trending Online Classes

Certification Course on GST Invoice Management System (IMS)

CA Pratibha Goyal

Enroll Now

28 November 2024
Certificate course on Income Taxation of Indians in the US

Saniya Mushrif

Enroll Now

30 November 2024
Basics of UAE Corporate Tax and VAT(With Recording)

CA Mohd Asim

Enroll Now

07 December 2024

view all classess

Subscribe to the latest topics :

Search Forum:

Forum Home

Popular Threads

Recent Posts

Unreplied Threads

Settings