Understanding and Applying Lower of Cost or Market (LCM) Adjustments for Inventory

The video tutorial explains the concept of Lower of Cost or Market (LCM) in inventory management. It discusses how LCM is an adjustment made to inventory at the end of a period to ensure it is reported at the lower of cost or market value. The video details the definitions of cost and market, and when to record a loss if the recorded cost is higher than the replacement cost. It also outlines three methods for applying LCM: by individual items, major categories, or the entire inventory. The tutorial concludes with a preview of the next video on how to apply LCM practically.

Describe the three methods a company can use to apply the LCM adjustment.

Why might a company choose to do LCM adjustments based on individual items rather than as a whole?