Inventory valuation under ICDS II follows lower of cost or net realisable value, with detailed cost and disclosure rules. ICDS II applies to inventory valuation for business income and requires inventories to be valued at the lower of cost or net realisable value. It sets out the scope exclusions, the components included in cost, the costs excluded, and the permitted cost formulae such as specific identification, FIFO and weighted average cost. It also permits standard cost and retail methods where they approximate actual cost, requires item-by-item comparison with NRV, and prescribes rules for opening inventory, change of method, valuation on dissolution, and disclosure of accounting policies and carrying amounts.