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NRV - IAS # 02
12-04-2011, 07:05 PM
Post: #1
NRV - IAS # 02
Dear All,

Can any one explain that what should we hv to do in respect of following query.

During Inventory valuation at raw material stage we analysis as per market condition that Market price of raw material fall down from cost and as per IAS # 02 (Inventory should be measured at cost or NRV which ever is lower.)
As per IAS # 02 should we write down the value of our stock to NRV??
How ever such material will use in production of final product which market value will be simultaneously increases as per market condition.

I am confused that at RM stage where market value of our RM has been decreased weather we write down our stock to NRV or not because the market value of final product from such stock will be increased simultaneously.

regards

Umar[)]
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12-17-2011, 12:54 AM
Post: #2
 
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by umar_khi08@yahoo.com</i>
<br />Dear All,

Can any one explain that what should we hv to do in respect of following query.

During Inventory valuation at raw material stage we analysis as per market condition that Market price of raw material fall down from cost and as per IAS # 02 (Inventory should be measured at cost or NRV which ever is lower.)
As per IAS # 02 should we write down the value of our stock to NRV??
How ever such material will use in production of final product which market value will be simultaneously increases as per market condition.

I am confused that at RM stage where market value of our RM has been decreased weather we write down our stock to NRV or not because the market value of final product from such stock will be increased simultaneously.

regards

Umar[)]
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Assalam u Alaikum

Dear Umar,

I would like to quote para 32 pf the IAS 2 that deals with the case u r asking for

Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when a decline in the price of materials indicates that the cost of the finished products exceeds net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realisable value.

So, as it states, u dont hv to write down your inventory when finished product can recover its cost )

Regards

Nabeel Munawar
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