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INVENTORY VALUATION ( AS 2)....

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MPR Sanjay Kumar

1675 Points Posted on 13 August 2022

Raw material: Raw materials are to be valued at cost only. Exception: if the finished goods in which the raw material is used is likely to be sold below the cost, then the raw material should be valued at NRV.

could you please explain me elaborately and with example please

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Quick Summary

This discussion clarifies inventory valuation for raw materials according to AS 2. Generally, raw materials are valued at cost. However, if the finished goods are expected to sell below cost, raw materials should be valued at Net Realisable Value (NRV). The discussion also explores how replacement cost can be used as the best measure of NRV in such scenarios.

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 13 August 2022

Material and other supplies held for use in the production are all valued at Cost, if the finished product in which they are used are expected to be sold at or above the Cost, However, when there has been a decline in the price of material and it is estimated that Cost of Finished product will exceed net realisable Value, then row material are valued at NRV .In such case , the replacement cost of the material may be the best available of their NRV.