The lower-of-cost-or-net realizable value basis is an example of the accounting concept of prudence.

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The lower-of-cost-or-net realizable value basis requires that inventory be valued at the lower of its cost or net realizable value. This principle is a manifestation of the accounting concept of prudence, which requires that losses be recognized as soon as they are probable and gains be recognized only when they are certain.

The Lower-Of-Cost-Or-Net Realizable Value Basis Is an Example of the Accounting