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Basic Question 1 of 26
"Valuation of inventory at the lower of cost or market" abandons which of the following accounting principles?
B. Consistency
C. Conservatism
A. Historical cost
B. Consistency
C. Conservatism
User Contributed Comments 7
| User | Comment |
|---|---|
| quincy | remember this |
| danlan | I think it reflects the conservatism. |
| danlan | It abandons historical cost and reflects conservatism, check question 5 also. |
| UUchi | aha nice danlan i was confused :-) |
| cong | Under IAS, inventory is valued at the minimum of (historical cost, net realizable value). Under GAAP, inventory is valued at the minimum of (historical, market cost). Reversal is possible but subejct to the original write-down value under IAS and prohibited under GAPP. |
| gill15 | If LCM is valued at lower of historical cost or market, how is it that it abandons the historical cost principle? It's using it? Maybe because if the market value is lower than it will abandon the historical cost and use the market value? |
| Shaan23 | That does seem odd. Cost is historical |
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Colin Sampaleanu
Learning Outcome Statements
describe the measurement of inventory at the lower of cost and net realisable value and its implications for financial statements and ratios
CFA® 2024 Level I Curriculum, Volume 2, Module 6.