Net Realizable Value (NRV)

Net realizable value (NRV) is the estimated selling price of an asset less the costs of selling it. It is used to determine the value of inventory for financial reporting purposes.

The NRV of an asset is calculated by taking the estimated selling price and subtracting the costs of selling it. The estimated selling price is the price that the asset is expected to sell for in the marketplace. The costs of selling include the costs of transporting the asset to the buyer, preparing it for sale, and selling it.

The NRV of an asset is used to determine the value of inventory for financial reporting purposes. Inventory is an asset that a company holds for sale in the ordinary course of business. The NRV of inventory is used to determine the amount of cost of goods sold that a company should report on its income statement.

The NRV of an asset is also used to determine the amount of impairment loss that a company should recognize. An impairment loss is a loss that a company recognizes when the value of an asset has decreased below its carrying value. The carrying value of an asset is the amount that the asset is recorded at on the balance sheet.

The NRV of an asset is a critical concept in financial reporting. It is used to determine the value of inventory, the amount of cost of goods sold, and the amount of impairment loss.