TaxTMI 
TaxTMI 
II - Valuation of inventories (w.e.f. AY 2017-18)
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....nd this Income Computation and Disclosure Standard, the provisions of the Act shall prevail to that extent. Scope 1. This Income Computation and Disclosure Standard shall be applied for valuation of inventories, except: (a) Work-in-progress arising under 'construction contract' including directly related service contract which is dealt with by the Income Computation and Disclosure Standard on construction contracts; (b) Work-in-progress which is dealt with by other Income Computation and Disclosure Standard; (c) Shares, debentures and other financial instruments held as stock-in-trade which are dealt with by the Income Computation and Disclosure Standard on securities....
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....ase, costs of services, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Costs of Purchase 5. The costs of purchase shall consist of purchase price including duties and taxes, freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates and other similar items shall be deducted in determining the costs of purchase. Costs of Services 6. The costs of services shall consist of labour and other costs of personnel directly engaged in providing the service including supervisory personnel and attributable overheads. Costs of Conversion 7. The costs of conversion of inventories shall incl....
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....ual use of the production facilities. 9. Where a production process results in more than one product being produced simultaneously and the costs of conversion of each product are not separately identifiable, the costs shall be allocated between the products on a rational and consistent basis. Where by-products, scrap or waste material are immaterial, they shall be measured at net realisable value and this value shall be deducted from the cost of the main product. Other Costs 10. Other costs shall be included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. 11. Interest and other borrowing costs shall not be included i....
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.... 16. Cost of inventories, other than the inventory dealt with in paragraph 13, shall be assigned by using the First-in First-out (FIFO), or weighted average cost formula. The formula used shall reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition. 17. The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a peri....
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....phical area and cannot be practicably evaluated separately from other items in that product line, such inventories shall be grouped together and written down to net realisable value on an aggregate basis. 20. Net realisable value shall be based on the most reliable evidence available at the time of valuation. The estimates of net realisable value shall also take into consideration the purpose for which the inventory is held. The estimates shall take into consideration fluctuations of price or cost directly relating to events occurring after the end of previous year to the extent that such events confirm the conditions existing on the last day of the previous year. 21. Materials and other supplies held for use in the produc....