11: A.2. Inventory Count, Errors, and Valuation

Question 1

How do we calculate the lower of cost or market LCM for inventory under GAAP?

Answer 1

Here, we use the ceiling and the floor approach
ceiling: NRV= selling price - selling cost
floor: NRV - normal profit margin

Then we take the replacement cost, if it was between the ceiling and the floor, we take it as it is, but if it was above the ceiling, we take the ceiling, on the other hand, if it was under the floor, we take the floor amount

Question 2

How do we calculate the lower of cost or net realizable value LCNRV under GAAP?

Answer 2

we compare the NRV = Selling cost - selling price, with the cost, as simple as that

Question 3

How do we calculate the lower of cost or net realizable value LCNRV under IFRS

Answer 3

We just compare NRV = selling price - selling cost, with the cost
Also, under IFRS, there is only LCNRV Only!!