CFA Level 1

AAA

Assets - Inventory Valuation


GAAP requires inventory to be valued at the lower of cost to market. LCM can be calculated by using the item-by-item method or the major-category method.

1. The item-by-item method - This methods will look at each item and determine the LCM.

Example:

2. The major-category method - Under this method, each category is grouped and the lower of the cost to market is taken.

Example - Assume that our prior example represents a category.


Under this method the LCM should be $850.
Inventory Analysis
comments powered by Disqus
Related Articles
  1. Top 6 Ways To Recession-Proof Your Job
    Personal Finance

    Top 6 Ways To Recession-Proof Your Job

  2. A Guide To Financial Designations
    Personal Finance

    A Guide To Financial Designations

  3. The Claritas Investment Certificate: ...
    Professionals

    The Claritas Investment Certificate: ...

  4. 10 Steps To A Career In Hedge Funds
    Professionals

    10 Steps To A Career In Hedge Funds

  5. Study Does Not End After The CFA
    Professionals

    Study Does Not End After The CFA

Trading Center