National Drilling is a manufacturer of drill bits for large oil rigs that operate around the world. A major component in the manufacturing of the drill bits is diamonds. As a result of an increase in oil drilling due to the increase in oil prices, National Drilling has received, and is expected to receive, an increase in orders for new and replacement drill bits.With such a potential demand, National Drilling has purchased a large quantity of diamonds. Since diamonds are considered a precious metal, National Drilling is contemplating the proper valuation of its inventory, which is currently above cost.
Management has concluded that precious metals with a fixed monetary value and without substantial marketing costs can be recorded at market value, as discussed at a recent oil and gas conference that National’s accounting staff attended. As a member of the staff, you question the proper valuation of the diamond inventory.

Required: 

Utilizing the FASB’s Codification, determine with specific authoritative reference the proper valuation of the diamond inventory. What specific Codification references support your conclusion?