JGovender

Under IFRS, you compare Min(Historical cost, NRV)

Under USGaap, it's more tricky. It is Min (historical cost ; Replacement cost)
But the RC itself is determined as the value that lie between (NRV ; NRV - normal profit).
Then you have to calculate these valued.

Let's assume HC = 100 NRV = 90, normal profit = 3 and RC = 89

Under IFRS, the booking value will be 90

Under USgaap, NRV = 90 NRV - NP = 90-3 = 87 RC = 89
Then the booking value is Min (100 ; 89) = 89

If RC were = 80, then the booking value would be = 87
If RC were = 92, then the booking value would be = 92
Because RC should lie between (NRV ; NRV - normal profit).


thisisbrianly Wrote:
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> Hey guys,
>
> Just wondering if anyone has an easy to understand
> way of explaining lower of cost or market for GAAP
> inventory.
>
> Cost is easy to determine....for "market value",
> in the books it says to compare the carrying value
> to replacement cost, and it must lie between NRV
> and NRV- profit margin. I'm going through some
> examples, but still don't really get exactly how
> to pin what "market" is.
>
> Thanks!