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Fertilizer

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Jigna Bhatt

The document summarizes inventory valuation methods used by three fertilizer companies - National Fertilizers Limited, Chambal Fertilizers and Chemicals Limited, and Fertilizer Corporation of India Limited. National Fertilizers Limited values raw materials, packing materials, and stores & spares at lower of weighted average cost and net realizable value. Chambal Fertilizers and Chemicals Limited also values items like naphtha, raw materials, and packing materials at lower of weighted average cost and net realizable value. Fertilizer Corporation of India Limited values raw materials and packing materials at lower of weighted average cost and net realizable value as well.

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I studied the annual reports of three fertilizers companies - National Fertilizers Limited, Chambal Fertilizers and Chemicals Limited and Fertilizer Corporation of India Limited- with regard to valuation of inventories. My findings are as follows: NFL The company values its raw materials, packing materials and stores & spares at lower of weighted average cost and net realizable value. In case of stores and spares not moved for more than two years and upto five years, five percent of their value (on the basis of straight line method) is charged to revenue. In case of stores and spares not moved for more than five years, and so identified as surplus or obsolete, value is taken as certified by Valuers and diminution, if any, is charged to revenue. Finished and semi-finished goods are valued at lower of cost and net realizable value. Plant-wise finished stocks lying at warehouses are determined on FIFO basis. CFCL Naphtha, raw materials, packing materials and stores & spares are valued at lower of weighted average cost and net realizable value. However, materials and other items held for use in the production of finished goods are not written down if the finished product in which they will be used are expected to be sold at or above cost. Catalyst in use are valued at depreciated cost on the basis of amortization over their estimated useful lives. Loose tools are valued at depreciated cost on the basis of amortization over a period of three years. WIP and finished goods are valued at lower of weighted average cost and net realizable value. Their cost includes direct materials, labour, exise duty and a proportion of manufacturing overheads based on normal operating capacity. Traded products are valued at lower of weighted average cost and net realizable value. Bunkers remaining on board are valued similarly. Deck, engine stores & spare and victualling are valued at lower of FIFO cost and net realizable value. Waste is valued at net realizable value. FCIL Raw materials and packing materials are valued at lower of weighted average cost and net realizable value. Stores and spare parts are valued at weighted average cost. Finished and semi-finished goods are valued at lower of cost and net realizable value. By-products are valued at net realizable value. Material in process, stocks of coal ash, carbon slurry and carbon di-oxide are valued at nil. Scraps, to the extent received in the stockyard, are valued at net realizable value. Loose tools are written off over a period of three years. It is obvious from the data given above that although these three companies use more than one way to value their inventories, the main method employed is the weighted average cost method.

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Fertilizer

  • 1. I studied the annual reports of three fertilizers companies - National Fertilizers Limited, Chambal Fertilizers and Chemicals Limited and Fertilizer Corporation of India Limited- with regard to valuation of inventories. My findings are as follows: NFL The company values its raw materials, packing materials and stores & spares at lower of weighted average cost and net realizable value. In case of stores and spares not moved for more than two years and upto five years, five percent of their value (on the basis of straight line method) is charged to revenue. In case of stores and spares not moved for more than five years, and so identified as surplus or obsolete, value is taken as certified by Valuers and diminution, if any, is charged to revenue. Finished and semi-finished goods are valued at lower of cost and net realizable value. Plant-wise finished stocks lying at warehouses are determined on FIFO basis. CFCL Naphtha, raw materials, packing materials and stores & spares are valued at lower of weighted average cost and net realizable value. However, materials and other items held for use in the production of finished goods are not written down if the finished product in which they will be used are expected to be sold at or above cost. Catalyst in use are valued at depreciated cost on the basis of amortization over their estimated useful lives. Loose tools are valued at depreciated cost on the basis of amortization over a period of three years. WIP and finished goods are valued at lower of weighted average cost and net realizable value. Their cost includes direct materials, labour, exise duty and a proportion of manufacturing overheads based on normal operating capacity. Traded products are valued at lower of weighted average cost and net realizable value. Bunkers remaining on board are valued similarly. Deck, engine stores & spare and victualling are valued at lower of FIFO cost and net realizable value. Waste is valued at net realizable value. FCIL Raw materials and packing materials are valued at lower of weighted average cost and net realizable value. Stores and spare parts are valued at weighted average cost. Finished and semi-finished goods are valued at lower of cost and net realizable value. By-products are valued at net realizable value. Material in process, stocks of coal ash, carbon slurry and carbon di-oxide are valued at nil. Scraps, to the extent received in the stockyard, are valued at net realizable value. Loose tools are written off over a period of three years. It is obvious from the data given above that although these three companies use more than one way to value their inventories, the main method employed is the weighted average cost method.