10.1.3—Inventory valuation

Inventory is valued so that the statement reflects the cost of goods still held rather than goods already sold. The method and assumptions affect cost of sales, profit and current assets.

Obsolete, damaged or slow-moving stock may need a lower valuation. Consistency supports comparison, but the chosen method should reflect the information required.

If purchase prices rise, the cost assigned to units sold changes the reported gross profit and closing inventory even when physical stock is unchanged.

Inventory value is an accounting estimate, not automatically its selling price or cash value.