The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Lower-Of-Cost-Or-Market Basis

An accounting principle where inventory is recorded at either its historical cost or market value, whichever is lower, to ensure conservatism.

Conservatism

An accounting principle that requires potential expenses and liabilities to be recognized immediately, but revenue only when it is ensured.

Accounting Concept

Fundamental principles or theories that underpin the practice and procedure of accounting.