Inventory Valuation

What we did

Educated procurement, warehousing and relevant stakeholders on cost capitalization that is allowed under accounting standards.
Helped identify cost driver behind various overheads and calculated cost per unit that could be capitalized in different product lines. Also set up a process for quarterly review between the actuals and the capitalized cost to fine tune the capitalization rates.
Helped build a process in the system to capitalize freight cost using historical values of similar imports.
Agreed with external auditors (for freight cost and PPV) a threshold acceptable for variation between actual cost vs the capitalized cost.
Within limit: charge the difference to profit and loss account
Out of limit: adjust the difference in the cost of the inventory remaining in hand.
Designed normal loss calculation mechanism to capitalize the inventory cost according to the accounting standards.