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Revised schedule vi-inventory

11 February 2013

As per the FAQ issued by ICAI on revised schedule vi 'Inventory should always be classified as Current'. If it is the case then what is the use of the word consumption mentioned in 1st condition of Current Asset as per Revised Schedule VI?

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11 Replies

(Guest)

it's not necessary that inventory is always a current assert under revised schedule VI

CA Parul Saxena (CA) (8425 Points)
Replied 11 February 2013

but it is written under FAQ issued by icai

(Guest)

strange! biut I'll check it out.

(Guest)

yes FAQ 20 has said that. But i think there is lil doubt on it!!

CA Parul Saxena (CA) (8425 Points)
Replied 11 February 2013

that's why i am asking........me too have a doubt on it......

Sanjeev Sethi (Finance & Accounts) (40 Points)
Replied 12 February 2013

Hi it is ok as per revised schedule VI the inventory is to be classified as current.

CA Parul Saxena (CA) (8425 Points)
Replied 13 February 2013

and what about slow moving stock if neither expected to be utilized in operating cycle nor within 12 months after the balance sheet date.

(Guest)

I'ave got it. These stock are assumed to be dead stock or unusable stock and therefore will be sold soon and consequently current asset. No need to apply that 12 months rule and all on stock.

Karthik (student) (147 Points)
Replied 14 February 2013

according to the definition of current assets in revised schedule VI,

an asset is considered as current asset if,

(i) It is expected to be realised in, or is intended for sale or consumption in the company’s normal operating cycle;

(ii) It is held primarily for the purpose of being traded;

(iii) It is expected to be realised within 12 months after the reporting date;

(iv) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after reporting period date.

So, stock in trade is covered under (ii) above. It is held primarily for the purpose of being traded. Hence it should be always shown as current asset. It doesnt matter whether the inventory is non-moving or dead. It is primarily held for trading and not for any other purpose.

Sanjeev Sethi (Finance & Accounts) (40 Points)
Replied 15 February 2013

Originally posted by : Karthik

according to the definition of current assets in revised schedule VI,

an asset is considered as current asset if,

(i) It is expected to be realised in, or is intended for sale or consumption in the company’s normal operating cycle;

(ii) It is held primarily for the purpose of being traded;

(iii) It is expected to be realised within 12 months after the reporting date;

or

(iv) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after reporting period date.

So, stock in trade is covered under (ii) above. It is held primarily for the purpose of being traded. Hence it should be always shown as current asset. It doesnt matter whether the inventory is non-moving or dead. It is primarily held for trading and not for any other purpose.