CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following is a step in applying the lower-of-cost-or-market rule to inventories when remeasurement of the financial statements is required?
A. The historical cost of inventories must be remeasured using historical exchange rates to determine the functional currency historical cost value.
B. The functional currency historical cost value of inventories is compared with the market value of the inventories translated using the average exchange rate for the period.
C. Functional currency cost and market values are compared and any appropriate write-up to market is recognized.
Explanation: The step described in Letter B is to compare the functional currency historical cost value of inventories with the market value of the inventories translated using the current exchange rate, not the average exchange rate. The step described in Letter C is to compare the functional currency cost and market values of the inventories, and to recognize any appropriate write-downs to market. Write-ups are never appropriate.

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