Page 77 - Finac1 Test 1 slides

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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