Inventory Valuation

Inventory valuation is a critical process in determining the monetary value of unsold inventory at any given time—whether it be daily, monthly, quarterly, or year-end. According to Generally Accepted Accounting Principles, inventory should be valued at the lower of cost or net realizable value, ensuring accuracy in financial reporting and decision-making.

For companies covered under the Companies (Indian Accounting Standards) Rules, 2015, inventories are valued according to "Ind AS 2 – Inventories," whereas other companies follow "AS 2 – Valuation of Inventories" under the Companies (Accounting Standards) Rules, 2006. Understanding the nuances between these standards is essential for accurate inventory valuation.

Cost Exclusions

AS 2 excludes both Selling and Distribution OH, while Ind AS 2 excludes only Selling OH.

Service Providers

Ind AS 2 offers guidance on inventories for service providers, unlike AS 2.

Accounting Standards

Ind AS 2 applies to companies following Indian Accounting Standards, while AS 2 applies to others.

Inventory Measurement

Both standards require inventory to be valued at the lower of cost or net realizable value.

We assist businesses in determining the correct inventory valuation in compliance with either AS 2 or Ind AS 2, depending on the applicable accounting standards. This ensures that inventory is reported accurately, contributing to reliable financial statements.