Valuation of closing stock by mining company

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?

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.

Kindly help me to understand this issue.

Replies (1)

Sirs,

In my opinion Cost Audit Rules are applicable to companies in Mining industry.

Accordingly at the end of the Accounting Period adopted by the company the material in various stages has to be valued as WIP -ore,WIP-smelted ore,WIP-metal& FG-metal etc,.This would be the correct treatment of Revenue recognition.

In the absence of the above, the income might have been under stated.

kkm

 

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