Treatment of under/over absorbed overheads
28 February 2009
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Good luck For All,
Kindly Let me Know Is Any Indication of under/ over absorbed production overheads’ treatment in IFRSs. If yes Then What And In which one. If Not Then What Is The Proper treatment?
Regards
Naveed
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There provisions given on this in IAS 2 (Inventories para13). I don`t have knowledge of Cost Accounting yet, but here is what IAS 2 suggests
Allocation of Fixed overheads should be based on Normal Production Capacity of Plant
Fixed over heads should not increase in periods of Very Low Production
Unallocated Fixed Overheads to be Expensed out.
Uptill here it is all clear however i don`t no what does IAS means to say
“In periods of abnormally high production, the amount of fixed overheads allocated to each unit of production is decreased so that inventories are not measured above cost“
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