ICDS II : Valuation of Inventories

Inventory valuation requires lower of cost or net realisable value, with prescribed cost components and allowed cost formulas.

ICDS II requires valuing inventories at the lower of cost or net realisable value. Cost includes costs of purchase, services, conversion and other costs to bring inventories to present location and condition; excluded are abnormal waste, non production storage, unrelated administrative overheads and selling costs. Specific identification applies for non interchangeable items; otherwise FIFO or weighted average must be used. Permitted techniques include standard costing and the retail method if they approximate actual cost. NRV is estimated selling price less costs to complete and sell and comparison with cost is generally on an item by item basis.