Where inventories in an industry are measured by reference to historical cost which of the following measurement rules applies subsequent to initial measurement?
A) historical cost;
B) discounted cash flow;
C) lower of cost and net realisable value;
D) replacement cost.

Question

Quizplus · Accepted Answer

If inventories are measured by historical cost, then the appropriate subsequent measurement rule is lower of cost and net realisable value, which means that inventory should be valued at the lower of its historical cost or its net realisable value. This ensures that inventory is not overstated on the balance sheet by recognizing any declines in the value of inventory. The other choices, including historical cost, discounted cash flow, and replacement cost, are not applicable in this scenario where inventories are measured at historical cost.

Where Inventories in an Industry Are Measured by Reference to Historical