Valuation of Stock ON YEAR END

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Kunal Mittal (Querist)
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29 March 2022 We had deposited all the returns of 17-18 & 18-19 in 19-20 with interest and penalty. Penalties for late deposit of 3B were waived off later on. can we apply for refund of those penalties now and how.
Kindly guide

Mahendra Patel

Mahendra Patel (Querist)
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30 March 2022 Dear Sir,

We have manufacturing related to metal products (Single raw material ) and metal prices regularly up and down.
we generally valuation of our inventory on last month average price of our raw material.

We have a order of export @ 700 per kg , this material billed to customer on 700 per kg but due to unavoidable circumstances export order postponed to after 1 months in apr -22.

hence my inventory level up by this order and my last month average rate of raw material is 800/-
total inventory we have 50 M.Ton out of this 15 M.T stock related to export order.

so kindly guide us can we valuation of my export order stock on 700 per kg and for remaining stock on 800/- per kg

because if we are not doing this my profits will go very high.

kindly guide us thanking you .

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2025 Hi! Thanks for sharing the details.

Regarding your query on valuation of stock for export order delayed beyond year-end:

Key Points to Consider
Valuation Principle:
Under Accounting Standards (AS 2) and Ind AS 2, inventory should be valued at the lower of cost and net realizable value (NRV).
Cost can be determined using FIFO, weighted average, or other consistent methods.
Your Scenario:
Export order price: ₹700/kg
Current average raw material cost (used for valuation): ₹800/kg
Export order delayed beyond year-end (inventory still held)
Total inventory: 50 MT, out of which 15 MT is related to export order
Impact on Profit:
Valuing export order stock at ₹700/kg (lower than current cost ₹800/kg) will reduce inventory value and consequently lower profit.
Valuing at ₹800/kg increases inventory value and profits.
What You Can Do
For Export Order Stock (15 MT):
If you are sure that the export order will be executed at ₹700/kg (the contract price), and the sale is realizable at ₹700/kg, then you can value this stock at ₹700/kg because NRV = expected selling price less estimated costs.
For Remaining Stock (35 MT):
Value at ₹800/kg as per usual method (average cost).
Important: Documentation and Consistency
Maintain proper documentation to justify valuation: contracts/orders, correspondence on postponed export, market prices, etc.
Ensure the valuation method is consistent and complies with accounting standards.
Disclose the valuation method and reasons in financial statements.
Tax and Audit Implications
Consult with your tax advisor or auditor because tax laws may have specific rules on inventory valuation.
Generally, Income Tax Department expects inventory valuation as per the accounting standards.

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