Historical cost vs. Fair market value
Historical cost
· objective, highly reliable, relevant declines as values change
Fair market value
· more subjective, more relevant, less reliance.
Financial statement footnotes required to mention about the measurement of assets and liabilities:
· Basic for measurement
· Carrying value of inventory by category
· Amount of inventory carried at fair value less costs to sell
· Written-downs and reversals, with discussion of the circumstances that led to the reversal
· Inventories pledged as collateral for liabilities
· Inventories recognized as an expenses
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