valuation of inventory
This query is : Resolved
22 July 2009
if we change the method of valuation of inventory from fifo to weighted average method then it is required to change the value of opening stock and adjust the difference with the current year profit or loss.
and the other thing can A.O. rejects the change in method of valuation of inventory that we have adopted ? can he disallow the treatment ?
Please give me any case reference or judgement for this situation.
and the other thing can A.O. rejects the change in method of valuation of inventory that we have adopted ? can he disallow the treatment ?
Please give me any case reference or judgement for this situation.
24 July 2009
I believe AO is auditing officer. If the company has a valid reason for changing the method of valuation, then the AO cannot reject it. Devising accounting policies and compliance to Accounting Standards is the responsibility of the management. Auditor should only commnent on those if he is not given satisfied with the treatment. If the company changes the policy for a valid reason and gives its impact on the profit and loss account for the current year clearly in the notes on accounts, then the auditor need not reject it.
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