Final answer:
The lower of cost or market (LCM) is applicable to companies that use both the FIFO and LIFO methods of inventory valuation. It ensures that inventory is valued at the lower of its cost or its current market value.
Step-by-step explanation:
The lower of cost or market (LCM) is applicable to companies that use both the First-In, First-Out (FIFO) and Last-In, First-Out (LIFO) methods of inventory valuation. LCM is a method used to value inventory at the lower of its cost or its current market value. It helps companies remain conservative in valuing their inventory by ensuring that it is not overstated.
For example, let's say a company has an item in inventory that was purchased at a cost of $10, but its market value has dropped to $8. According to the LCM rule, the inventory should be valued at $8 rather than $10, as it is the lower of the two values.
Therefore, the statement that the lower of cost or market is applicable only to companies using FIFO is False.