At what rate are non-monetary items such as inventory and PPE measured?

Non-monetary items like inventory and property, plant, and equipment (PPE) are typically measured at the historical rate. This approach reflects the actual cost incurred to acquire the asset at the time of purchase, providing a stable and reliable basis for financial reporting. Historical cost accounting allows for consistency in financial statements over time, ensuring that the value of the asset reflects its original cost rather than fluctuating market values.

Using the historical rate is particularly important for non-monetary items because their values do not change frequently or directly with market conditions. For instance, while monetary items are subject to immediate changes in value due to exchange rate fluctuations, non-monetary items do not experience the same volatility. This approach aligns with the accounting principle of reliability, allowing stakeholders to trust the reported figures.

Fair market value and current or spot exchange rates apply under different circumstances, often related to monetary items or when specific accounting standards require revaluation under certain conditions. However, for measuring non-monetary items on the balance sheet, historical cost remains the primary method.