Ind AS 2: Valuation and recognition of sub-grade iron ore fines in the books of accounts as an inventory

Ind AS 2 Inventories, states that when joint product and by product are also produced during the production of the main product on a consistent basis, and the by-products which are immaterial are measured at net realizable value and the same is deducted from the cost of the main product. However, if it is in the nature of material by-product, its cost is allocated between the products on a rational and consistent basis. Further, as per Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Error, the changes made in accounting estimates should be recognized prospectively in the statement of profit or loss.

In one of such example, X Ltd. engaged in the production of basic and special steels for domestic construction, as well as for sale in export markets. It owns iron ore, flux and coal mines. The sub-grade iron ore produced in captive mines is not used for production. Moreover, the Central Government restricts the company to sell these sub-grade iron ore in the open market. So, the company discloses this in notes to account but not valued it as inventory. A few months later, the government permitted the company to sell these sub-grade iron ore in the open market. Whether the present policy of the company discloses these sub-grade ore in notes to account but not valued it as inventory is correct?

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