The lower of cost and net realizable value basis of valuing inventories ensures that inventories are

Question

Quizplus · Accepted Answer

The lower of cost and net realizable value (NRV) method ensures that inventory is stated at the lower of its historical cost or the net amount that can be realized from its sale. This approach reflects obsolescence by recognizing when the selling price (or value) of inventory has fallen below its original cost, necessitating a write-down to NRV to reflect the reduced value.

The Lower of Cost and Net Realizable Value Basis of Valuing