Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 9 - Inventories: Additional Valuation Issues - Concepts for Analysis - Page 539: CA9-1a

Answer

The main purpose of using the lower-of-cost-or-market method is to reflect the decline of inventory value below its original cost.

Work Step by Step

A departure from cost is justified on the basis that a loss of utility should be reported as a charge against the revenues in the respective accounting period it occurs.
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