Lower of Cost or Market” in Forex Trading: Understanding the Basics
The cost or market lower of cost or market (LCM) forex, is an accounting technique which allows companies to adjust the carrying value of certain assets on the balance sheet to the lower of the current market value or the cost of the asset. This is a conservative approach which values the asset based on its current worth and provides a better indication of its actual value. As a result of the LCM forex, companies must be prepared to reduce the value of certain assets on the balance sheet if the market value is lower than the original cost. This process can be difficult for companies as it can lead to unrealized losses even if the asset still has value. However, the LCM forex helps to improve the accuracy of balance sheet presentation and allows companies to better manage their financial position.