A specific exception to the use of historical cost to value assets is if the net realisable value of inventories falls below cost.In this case,the justification for the use of market value rather than cost relies on the:
A)comparability principle.
B)cost versus benefit principle.
C)materiality principle.
D)conservatism principle.

Question

Quizplus · Accepted Answer

The conservatism principle states that losses should be recognized as soon as possible but gains should only be recognized when they are assured or realized. Using the lower net realizable value of inventories rather than their historical cost is a conservative approach that recognizes potential losses and reduces the risk of overstating the value of assets.

A Specific Exception to the Use of Historical Cost to Value