PRC-1 · Chapter 7 · Question 44 of 100
What is the primary reason IAS 2 requires inventory to be written down to Net Realizable Value when it falls below cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The prudence concept
Explanation
The prudence concept requires that assets are not overstated and expected losses are recognized immediately. If NRV is below cost, an expected loss exists, and the asset must be written down.
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