A value of a good can shift over time. This holds significance, because if the price at which the inventory can be sold falls below the net realizable value of the item, thus triggering a loss for the company, then the lower of cost or market method can be employed to record the loss.
when investors value a company's inventory, those assets shall be recorded on the balance sheet at either the market value or the historical cost.
Historical cost refers to the cost of inventory at the time it was originally purchased.
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