Manufacturing & Industrials

Inventory, fixed assets, working capital, and multi-entity groups with tender and export exposure.

In manufacturing, the balance sheet decides how much of the reported profit is real.

Manufacturing groups carry their complexity on the balance sheet: inventory valued at every stage of production, capital-intensive assets with long lives, receivables from government and large customers on extended terms, and group structures that grew one plant or one joint venture at a time.

We work with manufacturers on the valuation, control, and audit questions that gather there, and on the finance processes that keep a multi-entity group’s numbers reliable through the year.

On the agenda

Inventory

Inventory values the cost records cannot support

IAS 2 (Ind AS 2) requires fixed production overheads to be allocated on normal capacity, with abnormal waste and unallocated overheads expensed as incurred. Many companies still use standard costs that have not been reconciled to actuals for years, or absorb overheads on actual output when volumes fall, which inflates inventory at exactly the moment the business is weakest.

Net realisable value testing of slow-moving stock often becomes a year-end formality. Differences on physical verification, work-in-progress estimates, and goods in transit at the cut-off are where audit adjustments tend to cluster.

Fixed assets

Component accounting, and capital work-in-progress that never closes

IAS 16 (Ind AS 16) requires significant parts with different useful lives to be depreciated separately, and Schedule II to the Companies Act calls for disclosure where useful lives differ from its indicative lives. Meanwhile, capital work-in-progress keeps absorbing borrowing costs and project overheads long after assets are ready for use.

A capitalisation review at each quarter end, supported by a register of assets available for use, prevents most of the year-end restatements we see.

Receivables

Tender receivables, retention money, and credit loss

Government and public-sector customers pay on long cycles, with retentions and performance guarantees attached. A credit loss model that treats these balances like ordinary trade receivables, or ignores the time value of retention money held for years, misstates both the provision and the revenue.

Liquidated damages clauses are variable consideration under IFRS 15 and belong in the revenue estimate. They should not wait for a provision booked on the day the penalty is levied.

Group

Multi-entity groups and related party flows

Contract manufacturing between group companies, shared plants, and joint ventures all create related party transactions that need arm’s length support under the Companies Act and, above the thresholds, transfer pricing documentation.

Consolidation depends on classifying joint arrangements correctly under IFRS 11 (Ind AS 111). A joint operation and a joint venture produce very different financial statements from the same plant.