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8th sum in icai book
Accountancy
If the nrv is zero without processing it further, why shouldn't we take that as the value of the inventory
Answers (7)
CA Suraj Lakhotia Admin
Because we can sell at a higher price post process
But shouldn't we consider the lowest of values
CA Suraj Lakhotia Admin
Hence we consider NRV after processes
So if the partly finished goods have zero nrv at current stage always we have to compare cost as well as the nrv of finished goods and subtract that with the costs to be incurred to complete the good right?
Thread Starter
Rithu VSo if the partly finished goods have zero nrv at current stage always we have to compare cost as well as the nrv of finished goods and subtract that with the costs to be incurred to complete the good right?
Not like that. If the partly finished goods can be processed further, we consider the selling value of FG and reduce further processing cost. Say for example at WIP stage we can sell the product at 50. If we process it further by incurring Rs. 30, we can sell it at 90. In this case extra cost to process is 30 and extra revenue is 40. So we would process further. NRV would be 90-30 = 60. However if we process the product by incurring 30, and we get revenue of Rs. 70, it is not advisable to process further.
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