[/Q/]
Q8. Initial Measurement of Inventory
How are inventory items measured at the time of recognition?
[/A/]
When an inventory item is initially recognized, it is measured at cost.
[Note for IFRS]
In subsequent periods, inventory is measured at the lower of cost and net realizable value.
[Note for US GAAP]
In subsequent periods, inventory is measured at the lower of market.
The market refers to current replacement cost with the following limitations:
a. The market should not be higher than net realizable value (NRV).
b. The market should not be lower than NRV less normal profit margin.
© AccountingInfo.com