Question

Why we record assets at historical cost or nrv which ever is lower?

Answer 1

Answer:

Conservatism dictates that accountants avoid overstatement of assets and income. ... This simply means that if inventory is carried on the accounting records at greater than its net realizable value (NRV), a write-down from the recorded cost to the lower NRV would be made.

Hope this will help you

Answer 2

Hiii mate

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Here's ur answer

NRV , in the case of inventory, is the estimated selling price in normal course of business.

In case of inventory, a company may find itself holding inventory that has an uncertain future; meaning the company doesn't know if or when it will sell. Obsolescence, major price declines, many other problems can contribute to uncertainty about the 'realisation ' for inventory items.

Therefore, accountants evaluate inventory and employ lower of cost or net realizable value (NRV).

Hope it helps uh

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