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INVENTORIES
Net Realisable Value (NRV)
• Definition
• Estimated selling price
• Less estimated costs of completion
• Less estimated selling costs
• Not the same as FV less costs to sell
• NRV is entity‐specific
• NRV of raw materials is usually replacement
cost
• If used in the production of finished goods, not written down
to NRV if the finished good can be sold above cost
• Annual NRV assessments required
• NRV write down - expense to P/L i.e. included in cost of sales
• NRV write down reversal - Reduction of expense in P/L
• When evidence of change in circumstances exists
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