When the market value of inventory items has declined below their cost,which method is the most appropriate in complying with current accounting standards?

Question

Quizplus · Accepted Answer

When the market value of inventory items has declined below their cost, the most appropriate method to use is net realizable value. This method ensures that the value of inventory is reported at its estimated selling price, less any costs associated with its sale. This approach is consistent with the matching principle of accounting, which requires that expenses be recognized in the same period as the related revenues. This method is also in compliance with current accounting standards, such as IFRS and US GAAP.

When the Market Value of Inventory Items Has Declined Below