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  1. mohan singh

    mohan singh New Member

    A manufacturing co. purchases raw material on 15/07/2015 value 2000000 and some other purchase during the period and on 31/12/2015 try to value its closing stock as per AS 2 i.e cost and NRV which ever lower . during audit a auditor how can justify NRV and what type of document can demand for NRV by an Auditor.
  2. ZED

    ZED Well-Known Member

    As per para 25 of the AS-2 , "An assessment is made of net realisable value as at each balance sheet date."

    As per para 22
    "Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the balance sheet date to the extent that such events confirm the conditions existing at the balance sheet date."

    (Hence, if the sale of inventories has been transacted , or otherwise contracted for, after the balance sheet date at a price lower than the cost , then this price is true value of the stock.)

    As per para 24

    "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 there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed 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."
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