Standard No. 9 revised the then existing standards, where the cost method and the LOCOM method are alternatively allowed for measurement basis, so as to allow, in substance, only the LOCOM method. It would be summerized as follows:
- Inventories should be carried at cost. If the carrying amount excees the net selling price, the carrying amount should be written down to the net selling price.
- For certain inventories of which the net selling price is not readily determinable, its replacment cost and other market-based amount can be used in place for the net selling price.
- Previously recognized written down should not be reversed even when the net selling price regained.
- Inventories held for trading activities should be measured at fair value at each balance sheet date. Changes in fair value are recognizes as gains or losses during the period.
Statement of Accounting Principles for Business Enterprises, which was set forth by the Business Accounting Deliberation Council (BADC), describes the generally accepted inventory methods: Specific identification method; First-in, first-out method; Last-in, first-out method; Average method; and Retail inventory method.