 Hello, in this lecture we will define lower of cost or market. According to fundamental accounting principles, while 22nd edition, the definition of lower of cost or market is required method to report inventory at market replacement cost when the market cost is lower than the recorded cost. So we're talking about basically a conservative assumption here in that we're looking at the inventory, we're seeing how much it was purchased at. That's what we're usually keeping it on the books for. However, if it's gone down in value and we believe that the replacement cost is less than the cost that we purchased it for, we should take the lower of the two, meaning the asset of inventory would be at the lower of the two, which would make the company basically kind of look worse, which is why it's kind of part of the conservative assumption principle. For example, if we bought inventory, this forklift being inventory to us, we purchased it and sell it in the course of business. If the cost of it was 15,000, and we think that the replacement cost is 12,000, then we believe it has gone down in value. We shouldn't keep it on the books at the 15,000. We should put it on the books at the replacement value, meaning mark it down to the replacement value at that 12,000.