Updated on: Jun 7th, 2021
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7 min read
ICDS II shall be applied for valuation of inventories, except:
Sl. No. | Basis | ICDS II | AS 2 |
1. | Work in progress | ICDS II does not deal with Work-in-progress which is dealt with by any other ICDS. It does not specifically provide for work in progress arising in business of service provider | Work in progress arising in the ordinary course of business of service providers is not covered by AS |
2. | Machine Spares | ICDS II does not deal with machinery spares, which are dealt with by ICDS V on tangible fixed assets | Stores and spares are one of the classification of inventories. AS 2 does not specifically exclude machine spares |
3. | Borrowing cost | It includes interest and other borrowing cost in inventory cost, if they satisfy the condition of ICDS IX on borrowing cost | It does not include interest and other borrowing cost to the cost of inventory |
4. | Value of opening inventory | Provides for the valuation of opening inventory | Does not provide for the valuation of opening inventory |
5. | In case of dissolution | Cost of inventory will be valued at net realizable value | Does not specifically provide for the valuation of inventory in case of dissolution |
ICDS II is used for valuing inventories, excluding some specific categories. Costs included in inventory valuation are purchase, service, conversion costs. Exclusions include abnormal waste, storage, and selling costs. FIFO or weighted average cost formula is used. Opening inventory value is either the cost at the start of a new business or last year's end. Disclosure of accounting policies is necessary. Comparison with AS 2 highlights differences.