Final answer:
The buyer must record any expected losses on a non-cancelable purchase commitment in the period of market decline, due to the accounting principle of conservatism.
Step-by-step explanation:
If the contract price on a non-cancelable purchase commitment exceeds the market price, the buyer should record any expected losses on the commitment in the period of market decline. This is because of the accounting principle of conservatism, which states that an entity must recognize expenses and liabilities as soon as possible when uncertainty is involved, but to only recognize revenues and assets when they are assured of being received. Therefore, if it's expected that the market price will be less than the contract price at the time of delivery, a loss should be recorded in the period that the market decline occurs.