Never above what it is worth

The conservatism constraint says: when in doubt, do not overstate assets or income. Lower of cost or market applies that directly to inventory — it is reported at cost, or at its lower replacement cost, whichever is smaller.

The write-down hits cost of goods sold immediately, before the units ever sell. Damaged or obsolete goods follow the same idea, reported at net realizable value — what they could actually fetch, minus the cost of selling them.