Has A.R.B. 29 Settled the Problem of Inventory Valuation?

Abstract Up to the middle of the nineteenth century, most businesses were not too large or complex. They carried their inventories at cost and by the first-in first-out method. The problem was one of physical count and extension at the last invoice prices. Several authors of accounting books believed that the market values of assets should not be ignored and should at least be mentioned, probably by footnote in the balance sheet. During that time, the statement of financial condition was considered more important than the profit and loss statement, because the latter statement was merely used to prove the correctness of the change in the proprietary interest in the balance sheet. In 1929, the American Institute of Accountants reaffirmed the lower of cost or market rule for inventory valuation. In 1943, the Research Department of the American Institute made a survey of members of its Committee of Accounting Procedure for the purpose of formulating rules for inventory pricing. According to replies, it is evident that there was some agreement on application of the lower of cost or market value. However, the study reflects quite a bit of evidence indicating differences of opinion on many points in connection with that method of valuation and its application.