Which factor is important when determining the disposal proceeds of an item?

Determining the disposal proceeds of an item involves evaluating the amount received upon selling or disposing of the asset, considering certain financial factors that influence this value. The correct answer highlights that the disposal proceeds should be assessed as the lower of the actual proceeds from the sale or the original cost of the asset.

This approach aligns with accounting principles and the notion of prudence. When reporting the financial results, it is essential to recognize potential losses; therefore, if the sale proceeds are less than the original cost, recognizing this loss is necessary for accurate financial reporting. In contrast, if the proceeds are higher than the original cost, the actual proceeds from the sale would be reported as the gain, thus reflecting a more accurate view of the asset's financial outcome.

This method ensures that assets are not overvalued on financial statements and maintains compliance with accounting standards, providing stakeholders with reliable information about the entity's financial position.