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Basic Question 0 of 14
"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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Learning Outcome Statements
explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models
calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate
identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate
explain advantages and disadvantages of each category of valuation model
CFA® 2025 Level I Curriculum, Volume 3, Module 8.