LCM (Lower of Cost or Market)

LCM stands for lower of cost or market. Cost refers to the acquisition price of inventory calculated using one of the historical cost principle methods such as specific identification, LIFO/FIFO or Average cost. The term market however refers to other more complicated terms including Net realizable value (NRV), replacement cost, etc. Net realizable value (NRV) is the inventory’s estimated selling price in the ordinary operations of the business minus reasonable predictable costs to complete and dispose of the item. Also, see Inventory Valuation.

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