Inventory
I am asking whether it is treated as cost of revenue for the present year ?
As far as my understanding goes, obsolete refers to such inventory which is useless on account of change in technology or like reasons.....am i right?
Please let me know if you have some other conotation.....
in addition to stock, it has a host of items as spares, oil seals, gauges, o rings, wastage cloths, nut bolts, elecctric motors, fan belts.....
Now among all these, we can classify the same into stock...(Revenue item) and other i.e. repair and maintenance items.....
the obsolescence in stock will go to direct expenses, the same for repairs and maintenance items will go to indirect
Spares, oil seals, gauges, o rings etc. can be classified as inventory under the head 'machinery stores & spares' or 'consumables' and can be treated exactly the same as trade inventory. The question is, when I apply the format of Profit or loss account like this:
A. Revenue xxxx
B. Cost of Revenue (xxx)
whether I shall adjust the allowance for obsolescence under cost of revenue. I would answer 'yes'. What is your suggestion.
Obsolete inventory cost will find its place under Works on cost and Administrative on Cost etc....depending upon the TYPE of item of inventory
Is there any point or paragraph from IAS 2 or AS 2 that I can quote to substantiate the above view ?
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