As per As-2, what is the difference between Net relisable value & Fair value ? Explain with suitable examples?

How we can value inventory as per As-2. All your answers & suggestions are will welcome by us.

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  • Working as a branch head Last 5yeras in Manappuram finance Limited
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  • AS 2 Valuation of inventory is made on comparison of cost and net realisable value whichever is lower. This value should be disclosed in the financial statements. Other things relating to inventory to be disclosed in accordance with Accounting Standard-1 are accounting policies adopted in measuring inventory, cost formula and classification of inventory such as finished goods, raw material & WIP and stores and spares etc.
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  • Hi 
    NRV is the value of product to be sold in market irrespective of its sales price,
    and Fair value is the overall cost incurred for producing that product
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  • Was trying to understand the whole impairment thing in Long Lived assets; 1. So is NRV = Fair Value - Selling Costs 2. Is the Value in Use (IFRS) the PV of discounted or undiscounted cashflows? 2. What is the difference between Revaluation Model and Impairment (LOS 30g. vs LOS 30h.)
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  • Hi,

    NRV= Estimated selling price - estimated cost to make the sale(cost of completion, if semi finised + selling cost)
    NRV is from the point of view of the company. It means that for a particular product 2 different companies can have 2 different NRV

    Whereas, Fair value in the exit price from industry point of view. It means 2 diff companies in same industry will have same fair value.
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  • Net realizable value is the estimated selling price of inventory, minus its estimated cost of completion and any estimated cost to complete its sale. Thus, it is the net amount realized from the sale of inventory.
    Fair value is the estimated selling price of inventory at prsent situtaion.
     
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