Inventory Inventory, consisting of finished goods, is carried at the lower of cost and net realizable value. Cost is determined using weighted average costs. Cost of inventories includes the cost of merchandise and all costs incurred to deliver inventory to the Company's distribution centres including freight and duty. The Company periodically reviews its inventories and makes provisions as necessary to appropriately value obsolete or damaged goods. In addition, as part of inventory valuations, the Company accrues for inventory shrinkage for lost or stolen items based on historical trends. Review the two paragraphs titled 'Inventory' from Note 3. Explain in your own words. Is the company's policy appropriate under generally accepted accounting principles (GAAP), which are the accounting principles described in the textbook?