Why are inventories stated at lower-of-cost-or-net realizable value?
A) To report a loss when there is a decrease in the future utility.
B) To be conservative.
C) To report a loss when there is a decrease in the future utility below the original cost.
D) To permit future profits to be recognized.

Question

Quizplus · Accepted Answer

Inventories are stated at the lower of cost or net realizable value to ensure that any decrease in the future utility of the inventory below its original cost is recognized as a loss in the current period.

Why Are Inventories Stated at Lower-Of-Cost-Or-Net Realizable Value