Give Power To Your Portfolio

The demand for power is expected to increase substantially in future with more urbanization and industrialization in
store ahead. The per capita consumption of power in India is 600 KWH, which is very low as compared to 2,634 KWH
world average. The demand is higher than supply and with shortage in the supply side due to low installed capacity
overall, any kind of capacity addition will be welcomed in our country
Even in China due to power shortage recently , the Government has taken steps to reduce power consumption . For
example , it has issued an order asking all its citizens not to keep air conditioners below 25 degree celsius.
• All power generating, distribution, trading and power equipment manufacturing companies are set to benefit
from the bright prospects for the sector.
• You can invest in companies in power sector listed at Stock Exchanges. Some of prominent companies are Jindal
Steel & Power ,Reliance Energy, ABB, Tata Power, JP Hydro., Power Trading Co., Siemens, Crompton Greaves,
Areva T&D India Ltd, Voltamp Trans, Cummins India, NTPC, BHEL, GMR etc..
• You can also invest through Mutual Funds like Reliance Power Sector Fund

NAV Returns
1-Week 1-Month 3-Months 6-Months 1-Year 3-Years Incep.
NAV Growth 3.48% 3.88% 26.45% 19.76% 87.08% 64.98% 59.08%

Shares held as stock-in-trade or Investment ?

Shares held as stock-in-trade or Investment
The laws in our country are quite confusing at times.
Circulars issued from time to time clarify these issues.
But what can be done, when the circular creates more
confusion that clarifying the issue?
Gains from investment
We have at hand a crucial situation with regard to the
gains from investment. Whether the same be treated as
Capital Gain or Business Income.
• The point became important with the introduction of
Securities Transaction Tax (STT) and corresponding
lowering of tax rate in case of STT paid Capital gains.
• In majority of cases effective tax rate is lower when
the profit is considered as Capital Gain, than as
business income.
• In the case of FII's it is the other way round, since
they are benefited if the same is considered as
business income due to Double Taxation Avoidance
Agreements.
• Either way without any clear-cut instructions, the
issue is always open for litigation.
Past circular
• The issue was raked up one year back when the old
circular issued by The Central Board of Direct Taxes
(CBDT) through Instruction No.1827 dated August
31, 1989 was issued in the Income tax Department
to be followed to determine the taxability.
• Now again this issue is in the news with the
publication of CIRCULAR NO. 4/2007, DATED
15-6-2007
Present Circular No 4/2007
• The present circular hardly says anything new.
• It firstly refers to The Central Board of Direct Taxes
(CBDT) Instruction No.1827 dated August 31, 1989
• Then it goes on to discuss the findings of Supreme
Court Decisions in the case of
o Commissioner of Income Tax (Central), Calcutta
Vs Associated Industrial Development Company
(P) Ltd (82 ITR 586)
o Commissioner of Income Tax, Bombay Vs H.
Holck Larsen (160 ITR 67), and
o The Authority for Advance Rulings (AAR) (288
ITR 641) and also reference is to the AAR in the
case of Fidelity group
What the present circular has to say
The principles referred to by the Circular are summarized
below :
1. The assessee, who being in a position should produce
evidence from its records as to whether it has
maintained any distinction between those shares
which are its stock-in-trade and those which are held
by way of investment.
2. The emphasis is on facts and not on law.
3. The power to purchase or sell shares in the
Memorandum is not decisive of the nature whether
trading or investment.
4. The substantial nature of transactions, the manner of
maintaining books of accounts, the magnitude of
purchases and sales and the ratio between
purchases and sales and the holding would furnish a
good guide to determine the nature of transactions.
5. The purchase and sale of shares with the motive of
earning a profit, would result in the transaction being
in the nature of trade/adventure in the nature of
trade.
6. Where the object of the investment in shares of a
company is to derive income by way of dividend etc.
then the profits accruing by change in such
investment (by sale of shares) will yield capital gain
and not revenue receipt.
7. it is possible for a tax payer to have two portfolios,
i.e., an investment portfolio comprising of securities
which are to be treated as capital assets and a
trading portfolio comprising of stock-in-trade which
are to be treated as trading assets.
8. Where an assessee has two portfolios, the assessee
may have income under both heads i.e., capital gains
as well as business income.
9. No single principle would be decisive and the total
effect of all the principles should be considered to
determine in a given case
The last para of circular practically undoes the whole
exercise by stating that “ These instructions shall
supplement the earlier Instruction no. 1827 dated August
31, 1989.”
If we analyse the circular there are two new things that
emerge from this circular.
1. An assessee can have two portfolios.
2. The total effect of the guiding principles has to be
applied in a given case.
This reduces the threat faced by the retail investor. Now
some instances of non delivery investments or F&O
transactions will not give blanket permission to the
Assessing officer to consider the total investment as
Business.
Does this circular really gives any relief to the Investor?
Does this circular give any clarity on the matter? The
answer to the latter is definitely negative, but for the
former to an extent yes.
We wish the law makers understand the situation and
clear the dilemma. We would like to take the example of
option given to the assessee to chose Indexation benefit
as an alternate to long term tax at a lower percentage.
A similar option will be a real relief. The FII's have AAR to
take shelter, where does retail investor go?
4 July

How to get TDS/TCS Credit ?

Ensuring TDS/TCS Credit

1. Introduction
Tax Information Network (TIN), a repository of
nationwide tax related information, has been established
by National Securities Depository Limited (NSDL) on
behalf of the Income Tax Department (ITD). TIN is an
initiative by ITD for the modernisation of the current
system for collection, processing, monitoring and
accounting of direct taxes using information technology.
All quarterly TDS/TCS returns, giving details of TDS/TCS
submitted by the deductor are uploaded to the central
system hosted by NSDL. The central system also
receives, on a daily basis, details of TDS/TCS deposited
by deductors at the tax collecting banks through the
Online Tax Accounting System (OLTAS). The TIN central
system matches the details of the tax deposited given in
the TDS/TCS statements with the details of the tax
deposits uploaded by the banks and once they are
matched, each of the underlying deductees [whose
details are given in the TDS/TCS statements] are given
tax credit against his Permanent Account Number (PAN).
As per the Finance Act, 2006, credit of TDS/TCS would be
on the basis of the entries in the PAN-wise ledger
described above which is called Form 26AS or Annual Tax
Statement for tax deducted or tax collected on or after
1/4/2008. The PAN ledger will replace Forms 16/16A as
the basis for claiming tax credit in Income Tax Returns
from Assessment Year 2009-2010 onwards.
As can be seen from above, the authentication of tax
deposits claimed by deductors in their TDS/TCS returns
with the data of tax deposits from banks ensures that tax
credit is given only against funds that are actually
received in government account.
2. Ensure Tax Credit
1. The deductor should use the same TAN to deposit
tax in the bank and to prepare the TDS/TCS
statement.
2. In case the deductor has multiple TANs, only one
TAN should be used consistently, the other TANs
should be surrendered to ITD.
3. The deductor details, i.e. TAN, name, address of
deductor should be correctly stated in the
statement filed.
4. Challan details (BSR code- seven digits, challan
serial number upto five digits, date of tender)
mentioned in the statement should be same as
those stamped by the bank on the challan
counterfoil. (Verify the challan details from TIN
website (www.tin-nsdl.com) before filing the
statement to prevent errors)
5. The challan amount mentioned in the statement
should be same as the total amount deposited in
the bank.
6. Valid 10-digit PAN of deductee should be
provided.
3. Views for deductor on the NSDL TIN website
1. 'Challan Status Enquiry' displays the details of
challan deposited in the bank. There are two types
of views; CIN based view and TAN based view.
CIN based view: details of any particular challan can
be viewed.
TAN based view: details of all challans deposited in
the banks for a given TAN during a specified period
can be viewed.
2. 'Quarterly Statement Status' displays status of
the quarterly statement submitted by the deductor.
The deductor can also check the status of the
challans as well as the count of valid PANs in the
statement.
4.Inconsistency in the TDS/TCS statement
submitted by the deductor
TIN matches the challan details (BSR code, Cheque
Tender Date, Challan Serial No., TAN and Amount) in
the TDS statement with challan details uploaded by
the bank. Feedback is given to the deductor where
challans in the statement are not matched.
The status provided in the inconsistency letter is as
follows.:
Matched: Challan details, match with details
provided by bank.
Match failed (Amount does not match,
different TAN in challan and statement,
amount and TAN mismatch): indicates CIN in the
statement matches with CIN in details provided by
banks but TAN and/or amount do not match.
Match pending (CIN in statement not found in
bank data): indicates that CIN mentioned in
statement not received from the bank or the CIN
uploaded by the bank is different than the CIN issued
to the deductor.
In addition to the above the deductor is advised to submit
a correction statement providing valid PAN of all
deductees mentioned in the statement.
For detail guidelines on preparation of correction
statements please refer the Deductors' Manual and also
refer the Do's and Don'ts. These are available on the
NSDL-TIN website (www.tin-nsdl.com).
Action to be taken by the deductor ( Please refer to
the table on page No 3)
TAX INFORMATION NETWORK (TIN)
of Income Tax Department
Ensuring TDS/TCS Credit
For any clarification related to inconsistency, send
email at tin_returns@nsdl.co.in

TAX PAID BY THE EMPLOYER

DELHI ITAT RULING- TAX PAID BY THE EMPLOYER

There is good news for salaried taxpayers, especially
foreign nationals working in India. In case employer picks
up employees tax liability, this perquisite of tax-free salary
will not be taxed again.
A special bench of the Income Tax Appellate Tribunal (ITAT) ,
held that when tax on salary is paid by employer , this
perquisite is exempt from tax under Section 10 (10C) of
the Income-Tax Act, which means that it cannot be taxed
again. Therefore, if an employer picks up the income tax
tab of the employee, this benefit of tax-free employment
will not be taxed again.
This ruling was given in the case of RBF Rig Corp LLC, USA.
Issues when tax is paid by employer
• When tax is paid by the employer, whether it is to be
considered as a perquisite or salary is not expressly
stated under the Act. Tax is statutory obligation of the
employee and when met by the employer it can be
treated as a perquisite. The other view is that the tax
paid by the employer is merely allocation of salary
towards taxes.
• If the tax paid by the employer is considered to be a
perquisite, the next issue to be addressed is whether it
is a “monetary payment” or a “non-monetary
perquisite”. Again ,“monetary payment” and “non-
monetary perquisites” has not been defined under the
Act and different views are expressed as to their
classification. This distinction is important as it has a
direct impact on the taxability of the employee, in
terms of single or multiple grossing up and hence, the
overall cost for the employer.
Delhi Tribunal's judgement
The Tribunal has held that the tax paid by the employer
on behalf of the employee would constitute a
“perquisite”. such tax payment to the government would
not constitute monetary payment to the employee and
therefore not subject to multiple grossing up.
• If the employer agrees to pay Rs 100 net of tax salary
to the employee in India and the tax rate is 34%.
• When such tax payment by the employer is considered
to be a “non-monetary perquisite” then only Rs 34
shall be added to the taxable income of the employee.
• If such tax payment is considered a “monetary
payment” then Rs 34 will be subject to multiple
grossing up and Rs 52 will be added in the taxable
income of the employee, so that after paying a tax of
34% on Rs 152, the employee receives Rs 100 net of
tax salary.

E-FILING OF INCOME TAX RETURNS

RETURN MADE SIMPLER THROUGH E-FILING

NEW DELHI: As July 31 — the last date for filing income-tax returns for individuals, Hindu Undivided Families and other non-corporate assessees — draws closer, taxpayers have started preparing themselves for the yearly ritual of poring over their documents and making hurried calls to their chartered accountants. Though e-filing of returns is not compulsory for individual taxpayers, it has picked up in a big way because of the convenience it offers. All you need to do is to log on to the official website http://www.incometaxindiaefiling.gov.in or www.incometaxindiaefiling.gov.in, and register with your PAN, which will act as your user ID. Next, you need to identify the return form (in excel format) applicable to you and download the same. A salaried assessee with no other income (except interest from bank deposits) has to fill the form ITR 1. If he/she has also earned income by way of rent, selling a house property or stocks and so on, ITR 2 will be applicable. The Form-16 issued by your employer will serve as a helpful guide to filling the return forms. You need to go to Tools > Macro > Security and set the security level to medium and enable the macros. Once you are done with filling the form, you need to validate all the information by clicking on the Validate key and proceed to generate an XML file, which will have to be uploaded on to the site by hitting the Submit Return key. If you have obtained a digital signature (DS) certificate, you need to upload it along with the XML file. Once the website displays the acknowledgement details, your task can be considered complete. You can preserve a print-out of the acknowledgement slip for your records. However, in case you have submitted the return without a DS, the ITR-V form will be generated, which will have to be filled and submitted to your local income-tax office within 15 days of e-filing your return. In case you are unable to so, your return is rendered invalid. ITR-V has to be signed and submitted in duplicate. The I-T department will retain a copy and hand over the other duly stamped copy to you. This copy will serve as a proof that you have submitted ITR-V within stipulated time. While you are not required to attach any documents like the Form-16 or TDS certificates along with ITR-V, it is advisable to attach photocopies of the same to enable the taxman assess your return easily.
A digital signature (DS) is required to validate the electronic documents. A DS can be obtained for a fee from any of the seven Certification Agencies (CAs), including TCS, National Informatics Centre and MTNL, which are authorised by the government to issue digital signatures. An individual assessee is required to obtain Class II/Class III digital signature certificates, which are issued after the submission of relevant identity and address proofs. Usually, these are certificates issued with a validity period of 1-2 years, and need to be renewed thereafter. The process of obtaining a DS can take up to 1-2 weeks. The fees charged for issuing a DS depend on the vendor and the validity period. The cost of obtaining a Class II DS could range from Rs 300 to Rs 2,000. While e-filing has certainly made the taxpayer’s life simpler, certain hiccups such as slow downloading and uploading do crop up at times. One of the drawbacks of this system is that it does not guide you with helpful tips and information, points out Pune-based chartered account Vaibhav Sankhla. Besides, the portal’s functioning gets disrupted even if minor typographic errors such as extra spacing between the words or usage of an incorrect date format occur, says PricewaterhouseCoopers executive director Sandip Mukherjee. People who do not have the time or patience to file their returns directly through the official website can opt for the services offered by e-filing specific portals like Taxsmile and Taxspanner, who promise to simplify the procedure further for a fee (starting from Rs 250 a year). They arrange for a DS as well. Taking this route could make your task easier. “These portals provide useful inputs and tools that can guide the users properly,” says Mr Sankhla. You can also courier your ITR-V to their offices, which will in turn, submit the form at the local I-T offices, marking the culmination of the return-filing process. However, if you happen to miss the bus this time, you have an option of filing a belated return till March 31, 2010. But if the return is filed after March 31, 2009, you may have to shell out penal charges of up to Rs 5,000 if your papers are picked up for assessment by the taxman. Moreover, if any tax remains unpaid, the tax payer will also be liable to pay a penal interest of 1 per cent per month on the amount of unpaid tax from the date immediately following the due date, i.e. July 31, 2008, till the day the tax amount is finally paid.

Fair Value Derivatives Statement

GASB Issues Fair Value Derivatives Statement
USA July 7, 2008
The Governmental Accounting Standards Board has issued GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments.
Statement 53 is intended to improve how state and local governments report information about derivative instruments -- financial arrangements used by governments to manage specific risks or make investments -- in their financial statements. It specifically requires governments to measure most derivative instruments at fair value in their financial statements that are prepared using the economic resources measurement focus and the accrual basis of accounting.
The guidance in this Statement also addresses hedge accounting requirements and is effective for financial statements for reporting periods beginning after June 15, 2009, with earlier application encouraged.
"By requiring the fair values of derivative instruments to be reported on the face of financial statements prepared using the accrual basis of accounting, Statement 53 brings additional transparency to those transactions," said Robert Attmore, chairman of the GASB. "The application of the financial reporting standards required by this Statement gives the users of financial statements a clearer look into the risks their governments are sometimes exposed to when they enter into these transactions and how those risks are managed."
Governments often enter into derivative instruments as hedges of identified financial risks associated with specific assets or liabilities, or expected transactions (that is, hedgeable items). Many of these hedges are intended to effectively offset changes in interest rates or commodity prices. While derivative instruments can be an effective risk management or investment tool, they also can expose governments to significant risks and liabilities.
The new standard provides specific criteria that governments will use to determine whether a derivative instrument results in an effective hedge. Changes in fair value for effective hedges that are achieved with derivative instruments will be recognized in the reporting period to which they relate. The changes in fair value of these hedging derivative instruments do not affect current investment revenue, but are instead reported as deferrals in the statement of net assets or the balance sheet. Derivative instruments that either do not meet the criteria for an effective hedge or are associated with investments that are already reported at fair value are classified as investment derivative instruments for financial reporting purposes. Changes in fair value of those derivative instruments are reported as part of investment revenue in the current reporting period. Statement 53 also improves disclosures, providing a summary of the government's derivative instrument activity, its objectives for entering into derivative instruments, and their significant terms and risks.
More information about GASB Statement 53—including a question and answer document, fact sheet, and plain language article—is available at www.gasb.org.
[Source: SmartPros]
ABHASH KUMAR

MEMEBR JAB WE MET CA

REDEFINING PROFESSIONALIM.....

How to Incorporate a Company ?

Steps to be taken to get a new company incorporated:
Select, in order of preference, at least one suitable name upto a maximum of six names, indicative of the main objects of the company.
Ensure that the name does not resemble the name of any other already registered company and also does not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950) by availing the services of checking name availability on the portal.
Apply to the concerned RoC to ascertain the availability of name in eForm1 A by logging in to the portal. A fee of Rs. 500/- has to be paid alongside and the digital signature of the applicant proposing the company has to be attached in the form. If proposed name is not available, the user has apply for a fresh name on the same application.
After the name approval the applicant can apply for registration of the new company by filing the required forms (that is Form 1, 18 and 32) within six months of name approval
Arrange for the drafting of the memorandum and articles of association by the solicitors, vetting of the same by RoC and printing of the same.
Arrange for stamping of the memorandum and aticles with the appropriate stamp duty.
Get the Memorandum and the Articles signed by at least two subscribers in his/her own hand, his/her father's name, occupation, address and the number of shares subscribed for and witnessed by at least one person.
Ensure that the Memorandum and Article is dated on a date after the date of stamping.
Login to the portal and fill the following forms and attach the mandatory documents listed in the eForm Declaration of compliance - Form-1Notice of situation of registered office of the company - Form-18. Particulars of the Director's, Manager or Secretary - Form-32.Submit the following eForms after attaching the digital signature, pay the requisite filing and registration fees and send the physical copy of Memorandum and Article of Association to the RoC
After processing of the Form is complete and Corporate Identity is generated obtain Certificate of Incorporation from RoC.
Additional steps to be taken for formation of a Public Limited Company:
To obtain Commencement of Business Certificate after incorporation of the company the public company has to make following compliance
File a declaration in eForm 20 and attach the statement in lieu of the prospectus(schedule III) OR
File a declaration in eForm 19 and attach the prospectus (Schedule II) to it.
Obtain the Certificate of Commencement of Business.
Additional steps to be taken for registration of a Part IX Company:
The Part IX Company is required to file eForm 37 and eForm 39 apart from filing eForm 1, 18 and 32.
The company is required to file eForm 1 first and then the company can file all the other eForms (18, 32, 37 and 39) simultaneously or separately

VIKAS KAPAHI

TREASURER

JAB WE MET CA

REDEFINING PROFESSIONALISM....

Auditing Standard on Related Parties

IAASB Issues Auditing Standard on Related Parties; Makes Further Progress on Clarity Standards
New York July 14, 2008
Following the consideration and approval of due process by the Public Interest Oversight Board (PIOB), the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board under the auspices of the International Federation of Accountants (IFAC), today released International Standard on Auditing (ISAs) 550 (Revised and Redrafted), Related Parties and three clarity redrafted ISAs.
Related PartiesThe involvement of related parties in major corporate scandals encouraged the IAASB to revise its current auditing standard on the subject. The revised Related Parties standard clarifies the meaning of "related party" for purposes of an audit. It also makes clear the auditor's responsibility to obtain sufficient evidence about the required accounting and disclosure of related party relationships and transactions and to understand how such relationships and transactions affect the view given by the financial statements.
"The standard will strengthen current auditing practice in this area by emphasizing the need for the auditor to understand related party relationships and transactions in order to identify the risks of material misstatement to which these may give rise, and directing the auditor to focus work effort on the assessed risks of material misstatement, including those due to fraud," explains John Kellas, IAASB Chairman.
"The revised standard clarifies the auditor's responsibilities in those cases where the financial reporting framework establishes minimal or no related party requirements. In addition, it provides enhanced guidance to assist the auditor in understanding and responding to the risks of material misstatement that may arise in relation to related parties with dominant influence," emphasizes Kellas.
Clarity Redrafted ISAsIn addition to ISA 550 (Revised and Redrafted), the IAASB has also released the following clarity redrafted ISAs:
ISA 250 (Redrafted), Consideration of Laws and Regulations in an Audit of Financial Statements;
ISA 510 (Redrafted), Initial Audit Engagements-Opening Balances; and
ISA 570 (Redrafted), Going Concern.
They form part of the IAASB's ambitious 18-month program to redraft existing standards following the clarity drafting conventions.* To date, the IAASB has released 15 final clarity redrafted ISAs. The IAASB is on track to finalize its complete set of clarified ISAs by the end of this year.
The complete set of clarified ISAs, including newly revised standards such as ISA 550 (Revised and Redrafted), will be effective for audits of financial statements for periods beginning on or after December 15, 2009.
The ISAs can be downloaded free-of-charge from the IFAC online bookstore at http://www.ifac.org/store.
About the IAASB and IFACThe objective of the IAASB is to serve the public interest by setting high quality auditing and assurance standards and by facilitating the convergence of international and national standards, thereby enhancing the quality and uniformity of practice throughout the world and strengthening public confidence in the global auditing and assurance profession. The Public Interest Oversight Board oversees the activities of the IAASB and, as one element of that oversight, establishes its due process and working procedures.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 157 members and associates in 123 countries and jurisdictions, representing more than 2.5 million accountants in public practice, education, government service, industry and commerce. In addition to setting international auditing and assurance standards through the IAASB, IFAC, through its independent standard-setting boards, sets international ethics, education, and public sector accounting standards. It also issues guidance to encourage high quality performance by professional accountants in business.
* Key elements of the clarity drafting conventions include: establishing an objective for the auditor with respect to the subject matter of each standard; clearly distinguishing requirements from guidance on their application; avoiding ambiguity through eliminating the present tense to describe actions by the auditor and using more imperative language where a requirement was intended; and other structural and drafting improvements to enhance the overall readability and understandability of the standards.
[Source: IFAC]
ABHASH KUMAR
MEMEBR JAB WE MET CA

REDEFINING PROFESSIONALISM........

Fair value rules will not change, says IASB

UK July 11, 2008
The principal body responsible for global accounting rules said it would not dilute the "fair value" standards that critics blame for increasing the scale of credit crisis-related write downs at banks.
The International Accounting Standards Board is pushing ahead with a process to review how the value of assets such as mortgage-backed securities can be established in an illiquid market.
But the rules on "fair value", which dictate that assets should be valued at the price they would fetch in the marketplace, will not change.
A panel established by the board to assess whether it can give companies more guidance on valuing illiquid assets met for the first time last month.
John Smith, a director of the board, said the panel was likely to meet again in the coming months, possibly several times.
There is no fixed timetable for meetings, however, or fixed objectives.
"If there's something to be done, we'd like to do it as quickly as possible. I couldn't tell you when but I would say this year clearly versus sometime further out," Mr Smith said.
Accounting rules drawn up by the board are used in more than 100 countries and are mandatory for companies listed in the EU.
The Institute for International Finance, a lobby group for financial institutions, has said there is a need to clarify some accounting rules.
[Source: The Telegraph]
-- Thanks & Regards
ABHASH KUMAR
JAB WE MET CA
REDEFINING PROFESSONALISM............

IAS-2 ( TECHNICAL SUMMARY)

Technical Summary

This extract has been prepared by IASC Foundation staff and has not been approved by the IASB. For the requirements reference must be made to International Financial Reporting Standards. IAS 2 Inventories
The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
Inventories shall be measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.