The Authority of History in Inventory Valuation.

Abstract This article focuses over the history of inventory valuation. The supposition that early evidence of the use of cost-or-market grew out of tax considerations is subject to other and more general objections. It might be expected that a method designed for tax purposes would include some reference to its purpose. But instead the explanation given is the kind which would appear if there was an accounting policy in effect that sought to recognize economic losses which were soon to be realized through sales-the statement that "their price has gone down." Furthermore, general conditions of what might somewhat inappropriately be called "public finance" in the fourteenth and fifteenth centuries were such as to make such a mild device as cost-or-market for the closing inventory insignificant as a tax-avoidance scheme. The contention has been made that the policy of write-downs disclosed above was an effort at tax avoidance, made in a time when ad valorem levies upon personal as well as real property were heavy, and hence has no general significance for accounting principles.