The strict lower of cost or market principle is a valuation rule from commercial law that applies to current assets. It states that current assets (e.g. inventories or receivables) must be recognised at their lowest value on the balance sheet date. This applies to both permanent and temporary impairments. The principle serves the principle of prudence and is intended to ensure that the balance sheet is prudent and realistic by anticipating possible losses. It is in contrast to the mitigated lower of cost or market principle, which applies to fixed assets. Special valuation requirements can be met by add-ons such as the Versino Financial Suite that enable advanced financial analyses.
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