The use of the lower-of-cost-or-market method to report inventory is an example of conservatism in financial reporting.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market method is a conservative approach in financial reporting as it values inventory at the lower of its original cost or current market value. This method ensures that inventory is not overstated on the balance sheet, which is in line with the principle of conservatism that encourages caution in financial reporting.

The Use of the Lower-Of-Cost-Or-Market Method to Report Inventory Is