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Preeti Sharma

Preeti SharmaThis Ind AS applies to all inventories except financial Instruments, Biological Instruments and Work in Progress arising under construction. It does not apply to the inventories held by
  • Producers of Agriculture, forest products and minerals products
  • Commodity broker

Commodity Broker shall measure the inventories at Fair value less cost to sell.

Producers of Agriculture, forest products and minerals products shall measure at Net Realizable Value.

Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services.

Inventories shall be valued at lower of cost and Net Realisable value

Cost shall include:

  • Cost of Purchase
  • Cost of Conversion
  • Other Cost

Cost of Purchase shall include

Purchase Price

+ Non Recoverable Taxes and Duties

+ Transport, Handling and other

Direct costs

-Trade Discount and Rebate

Cost of Conversion shall include all cost that directly related to the units of production such as direct labour, fixed and variable production, overhead incurred in converting material into finished goods.

Other Costs are those costs which bring inventories into present conditions and location.

Following costs are excluded from the costs:

  • Administration Costs
  • Abnormal Waste
  • Selling Costs
  • Storage costs, unless necessary in the production process before further production stage.

There are two methods of cost measurement technique:

  • Standard Cost
  • Retail Method

Following disclosure shall be made:

  • Accounting Policies adopted in measuring inventories including costs formula.
  • Carrying amount of inventories carrying at fair value less cost to sell
  • Amount of inventories recognized as expenses.
  • Amount of write down and reversal of write down.
  • Total carrying amount along with classification.

(Author can be reached at

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May 2024