Type of Packing Material to Be Included in the Cost of Inventory As Per Ind AS 2
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- Last Updated on 24 January, 2024
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FAQ given under the Educational Material on Ind AS 2 provides that while the primary packing material may be included within the scope of the term ‘materials and supplies awaiting use in the production process’ but the secondary packing material and publicity material cannot be so included, as these are selling costs which are required to be excluded as per Ind AS 2. For this purpose, the primary packing material is one which is essential to bring an item of inventory to its saleable condition, for example, bottles, cans etc., in case of food and beverages industry. Other packing material required for transporting and forwarding the material will normally be in the nature of secondary packing material.
This story discusses a case where the company is involved in the manufacturing of glass-based handicraft products and while measuring the stock includes the cost of all layers of protection to the cost of the inventory. However, the statutory auditor believes that all layers of protection should not be included in the value of inventory. In this regard, the management of the company seeks the advice for correct costing of inventory.
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