Net Realisable Value (NRV)
Definition
The estimated selling price of inventory less the costs to complete and sell it. Inventory is generally carried at the lower of cost and NRV, so a fall in NRV triggers a write-down.
Formula
NRV = Estimated selling price − Costs to complete and sell
Related Terms in Purchasing & Inventory
Lower of Cost or Market
An inventory valuation rule requiring stock to be reported at the lower of its historical cost or its current market value, so that likely losses are recognised promptly.
Standard Costing
A method that assigns predetermined standard costs to products and then analyses the variances between standard and actual costs. It is widely used in manufacturing for control and pricing.
Bill of Materials (BOM)
A structured list of the raw materials, components and quantities needed to make a finished product. It drives manufacturing cost, inventory planning and procurement.
Cycle Count
A method of checking inventory accuracy by counting a subset of items on a rolling schedule rather than halting operations for a full stocktake. It keeps records accurate with less disruption.
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