What specific measurement does UK GAAP require for inventories held for distribution?

In the context of UK GAAP, inventories held for distribution are measured at the lower of cost and net realisable value. Cost encompasses all costs incurred in bringing the inventory to its current condition and location. This includes the purchase price, import duties, and any other non-recoverable taxes as well as direct costs attributable to the production of the goods.

When assessing net realisable value, it reflects the estimated selling price of the inventory in the ordinary course of business, less any applicable costs of completion and disposal. This approach ensures that inventories are carried at a value that is not overstated on the balance sheet, aligning with the prudence principle in accounting.

The focus is on adjusted cost as it integrates these considerations. Specifically, it implies that the cost of the inventory may need to be adjusted to reflect any lower recoverable amount to adhere to the principle of conservatism and not overstate the assets.

This method is consistent with UK GAAP's emphasis on financial prudence, ensuring that financial statements present a fair view of the company's financial position.