Valuation of closing stock
This query is : Resolved
31 January 2012
A company got mining right from Government. Its activity involves excavation of ore, concentration of metal from excavated ore, and then smelting and refining of concentrated metal. But the company neither values closing stock of ore nor does it values closing stock of concentrated metal. At the most, it shows WIP for concentrated metal. Is this type of valuation acceptable?
31 January 2012
Dear Jay,
all the stocks shall be valued in accordance with AS-2.
In your case,
1. RM-Ore,
2. WIP - Excavation Process, Concentrating process, Smelting process and refining process
3. FG - Concentrated Metal
all the stocks shall be valued in accordance with AS-2.
In your case,
1. RM-Ore,
2. WIP - Excavation Process, Concentrating process, Smelting process and refining process
3. FG - Concentrated Metal
01 February 2012
Thank you,Sir. What I forgot to mention that the company is charging all its ore extraction expenses, concentrating expenses to P/L A/c and citing such charging off to revenue as an argument for not calculating closing stock. If possible, kindly explain whether such treatment is correct.
01 February 2012
No such treatment is wrong.
As per AS-2, Inventory shall be valued at Cost or NRV.
Cost means Cost incurred to bring the inventory to its present location and Condition.
Extraction and Concentration expenses bring the ore to its new condtion and location. i.e Concentrating process/extraction process.
Therefore, such expenses incurred shall be included to arrive the cost
As per AS-2, Inventory shall be valued at Cost or NRV.
Cost means Cost incurred to bring the inventory to its present location and Condition.
Extraction and Concentration expenses bring the ore to its new condtion and location. i.e Concentrating process/extraction process.
Therefore, such expenses incurred shall be included to arrive the cost
01 February 2012
In my earlier reply, the following para shall be suffixed with the Second Para.
"Which ever is lower"
"Which ever is lower"
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