LCM Reserve

Last Updated: Jun 7, 2019

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An LCM Reserve (lower of cost or market) is an amount reserved for when the market price for a company's inventory drops below the cost recorded on it's books. This amount can be reversed in future periods if the market price for the company's inventory improves. This reserve will show up on the balance sheet as a contra inventory account. If a lender is advancing on inventory based on a percentage of cost, the LCM reserve will need to be an ineligible on the borrowing base.