Inventory Valuation Rules: ICDS II Based on AS 2 for Businesses, Excludes Construction and Financial Instruments
ICDS II, based on Accounting Standard 2, applies to businesses and professions for inventory valuation, excluding certain categories like construction work-in-progress and financial instruments. Inventories are valued at cost or net realizable value, whichever is lower. Costs include purchase, services, conversion, and other costs necessary to bring inventories to their current state, excluding abnormal waste, storage, and administrative costs. FIFO and weighted average methods are recommended for cost assignment. Inventories should be valued individually, not globally, and disclosures must include accounting policies and inventory classifications. Changes in valuation methods require reasonable cause.