Net realisable value

Net realisable value (NRV) is the revenue (sales proceeds) expected to be earned in the future when the goods are sold, less any selling costs incurred.

Each individual item or each group of similar items of inventory should be stated in financial statements at the lower of cost and net relaisable value. At the balance sheet date it is necessary to make a reasonable estimate of NRV.

The comparsion between cost and net realisable value should be made item by item, but not the total inventory value. It may be acceptable to consider groups of items together if all are worth less than cost.

Related posts:

1. Prudence concept in accounting
2. Inventory disclosure
3. Average inventory cost
4. Unit cost inventory
5. Bookkeeping principles