The principle of faithful representation provides the guidance in reporting inventory at net realizable value when net realizable value is lower than cost.

Question

Quizplus · Accepted Answer

The principle of faithful representation requires financial statements to provide relevant and reliable information. Reporting inventory at net realizable value when it is lower than cost provides a more relevant and reliable representation of the inventory's value. Therefore, this principle guides the reporting of inventory at net realizable value.

The Principle of Faithful Representation Provides the Guidance in Reporting