Inventory Valuation Principle Steps:

• Identify the accounting standard: Under IAS 2 or GAAP, inventory prevents overstatement of assets.
• Determine cost: Includes purchase price, conversion costs, and other directly attributable costs.
• Calculate net realizable value (NRV): Estimated selling price minus completion and selling costs.
• Apply the rule: Value inventory at the lower of cost or NRV to reflect conservatism.

Why A is correct:

• IAS 2 requires the lower of cost and NRV to avoid overstating inventory value if market declines.

Why the others are wrong:

• B: Higher of cost and NRV overstates assets, violating conservatism principle.
• C: Selling price ignores costs to sell, not a standard valuation method.
• D: Net book value applies to fixed assets, not inventory.

Final answer: A