Lower of Cost or Net Realizable Value Rule for Inventory

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Inventory is presented on the Balance Sheet at the lower of cost or net realizable value, where the net realizable value is the expected selling price minus any costs to complete the sale. If a company's net realizable value decreases such that it is lower than the inventory's cost, the company should take an inventory writedown for the amount of the difference.

International Financial Reporting Standards (IFRS) require all companies to use the lower-of-cost-or-net-realizable-value rule. U.S. GAAP also has the lower-of-cost-or-net-realizable-value rule, but companies using LIFO or the retail inventory method use the lower-of-cost-or-market rule instead.
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Sir, now with online schooling being the new norm, your videos have saved my semester of accounting. Thank you!

doublev

thank you!! I stared at my textbook for 20 minutes trying to figure this out, and you gave me the answer in 44 seconds

CarolineMoore-iyoj

Omg, I spent an hour reading the textbook and still confused. Boom, a four minutes video explains like a god, and I totally got it now. Thank you!

charliewangu

I can't tell you how thankful I am for your content. It has helped me push through this accounting class! Im on track to pass!

joshuahansen

Hey man! Thank you for these videos! They are helping me through Grad school! Its been 2 years since I took intermediate and everyone else is less than a year out from it. These have gotten me back up to speed in no time! Here is to passing the FARS section of my CPA exam thanks to you!

blake

Please Keep Making Videos Like These! Your helping a lot of people. :)

BigPatTV

Why wouldn't companies just raise their selling price if NRV<cost to make NRV>cost? If a company sells its product when the NRV<cost, then wouldn't it be operating at a loss?

harshp

Hi Sir I got confused when we calculate NRV should be deduct cost of the item itself nor not? Some say yes some say no😢 thanks

OOcean

well explained, solved my CIMA BA3 question doubt, Thank you!

sanjeewanibm

Thanks for these simple explanations for these accounting concepts :)

MyFinancialFocus

your videos are incredibly informative! more power to your channel

dc

Asset has a value of 1, 00, 000 which has NRV of 90, 000 can u suggest the journal entry if the good is lost by fire for 50, 000 out of which 40, 000 will be paid by insurance company out of which 30, 000 is already paid?

avisaxena

could u help me with this problem
A company has a year-end of 31 December.
Its inventory records on that date showed an inventory of 600 units with a cost of $10 each.
A fire on 31 December had totally destroyed 100 units and caused a further 50 units to be
damaged. These would cost $7 each to be repaired.
The inventory records had not been adjusted for the fire. The selling price is $15 per unit.
What is the value of the inventory to be used in the financial statements at 31 December?
A $4500 B $4850 C $4900 D $5400
btw ur video was amazing!!! thanksss

michellesilva

Thanks a ton this video was of great help

monikachowdhari

Sir, I think, ur sound is comparatively of low. I wish, u adjust it!

RosenNoor

where the $170 came from? I didn't get it :(

lintanganjani

sir, is the net realizable value an accounting policy? hope you can explain to me....thanks in advance

amzarhasmizan

Your videos are amazing I am a big fun. I like a lot Economics and Finance and thanks to your channel I am able to broaden my knowledge. Thank you. Also why did you name your channel Edspira.

ak-explorer

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