Economics · Accounting Standards
According to accounting standards, what is the correct treatment when net realizable value (NRV) falls below cost during inventory valuation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Reduce the inventory value to its estimated net realizable value and recognize the difference as a loss✓
- 2Maintain the inventory at historical cost and disclose the loss in notes to accounts
- 3Use average market prices to revalue the inventory upward if overall prices have increased
- 4Wait until the items are sold to determine actual loss before accounting for it
Correct answer
Reduce the inventory value to its estimated net realizable value and recognize the difference as a loss
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