HumanBookkeeping.com™ can help. We are expert bookkeepers that can help your small business with its bookkeeping needs. Here’s a short explanation of what Lower of Cost or Market means. If we can be of more help explaining what Lower of Cost or Market is or if we can help you with any of your small business bookkeeping needs, give us a call at 888-994-8626 (888-99HUMAN).HumanBookkeeping.com™ provides a way for small businesses to have outsourced bookkeeping at a significant savings. We provide our clients with pri-printed envelopes. You stuff the envelopes and our expert team does the rest with detailed reports and timely compliance support. Not to mention, you now have a team of experts at your disposal should you have questions or last-minute needs. Let’s start with answering what Lower of Cost or Market means:

One general framework concept of the FASB is the conservatism principle. A fundamental implication of conservatism is to not overstate the value of an asset. As such, accountants should use the lower of cost or market.

For example, if the market value of an asset drops below the book value of the asset, the company should write-off the impairment loss to reduce the asset’s book value to the new lowered market value. (This was the centerpiece in the banking & mortgage collapse controversy. Before the collapse, banks refused to make loss write-offs on property assets, which they claimed that they could not value. Thus, banks kept distressed assets at historical book values and thus overestimated their net assets.)

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