Accounting for IGCSE & O level - Final Statements (Section 13 - No. 8)
What is the impact of the 'lower of cost or net realisable value' rule on the statement of financial position?
It could reduce the reported value of inventory.
It could increase the reported value of inventory.
It has no impact on the value of inventory.
It always increases the reported profit.
Explication
The rule can lead to a lower valuation of inventory if NRV is less than cost.