Valuation of livestock.
This query is : Resolved
Radhey Shyam Agrawal
(Querist)
01 February 2014
In Meat factory how is Conducted the Valuation of its Livestock, whether AS 2 is Applicable on it or not?
CMA Ramesh Krishnan
(Expert)
02 February 2014
AS- 2 not applicable for live stock valuation
Radhey Shyam Agrawal
(Querist)
03 February 2014
But how will the valuation of the live sock in a meat factory be conducted?
02 August 2025
Great question! Here’s a clear explanation on **valuation of livestock in a meat factory** and applicability of accounting standards:
---
### 1. **Is AS-2 Applicable on Livestock?**
* **AS-2 (Valuation of Inventories)** specifically excludes biological assets like livestock.
* So **AS-2 is not applicable** for livestock valuation.
---
### 2. **How to Value Livestock in a Meat Factory?**
Livestock is a **biological asset**, and its valuation is generally governed by **Accounting Standard 6 (AS-6): “Depreciation Accounting”** doesn’t cover it, but recent accounting frameworks and standards (like Ind AS 41) treat biological assets differently.
However, under Indian GAAP, since AS-2 does not cover it, the common practice is:
* **Valued at Cost or Net Realizable Value (NRV), whichever is lower.**
* Cost here includes purchase price, plus costs incurred to bring the livestock to present location and condition (like feeding, veterinary expenses, transportation).
* NRV is estimated selling price less estimated costs to sell (like slaughtering, processing, marketing).
---
### 3. **Practical Approach**
* Record the livestock at **historical cost** (purchase price + direct costs).
* At each balance sheet date, assess for impairment or any permanent decline in value.
* If market value (NRV) is lower than cost, write down to NRV.
---
### 4. **Additional Guidance**
* Refer to **Income Tax valuation rules** if applicable, for livestock valuation.
* Consult with a **professional valuer or auditor** to determine a consistent valuation method for your factory.
---
If you want, I can help draft a simple valuation policy note for your records! Would that help?
---
### 1. **Is AS-2 Applicable on Livestock?**
* **AS-2 (Valuation of Inventories)** specifically excludes biological assets like livestock.
* So **AS-2 is not applicable** for livestock valuation.
---
### 2. **How to Value Livestock in a Meat Factory?**
Livestock is a **biological asset**, and its valuation is generally governed by **Accounting Standard 6 (AS-6): “Depreciation Accounting”** doesn’t cover it, but recent accounting frameworks and standards (like Ind AS 41) treat biological assets differently.
However, under Indian GAAP, since AS-2 does not cover it, the common practice is:
* **Valued at Cost or Net Realizable Value (NRV), whichever is lower.**
* Cost here includes purchase price, plus costs incurred to bring the livestock to present location and condition (like feeding, veterinary expenses, transportation).
* NRV is estimated selling price less estimated costs to sell (like slaughtering, processing, marketing).
---
### 3. **Practical Approach**
* Record the livestock at **historical cost** (purchase price + direct costs).
* At each balance sheet date, assess for impairment or any permanent decline in value.
* If market value (NRV) is lower than cost, write down to NRV.
---
### 4. **Additional Guidance**
* Refer to **Income Tax valuation rules** if applicable, for livestock valuation.
* Consult with a **professional valuer or auditor** to determine a consistent valuation method for your factory.
---
If you want, I can help draft a simple valuation policy note for your records! Would that help?
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