Net realizable value

Net realizable value is the estimated selling price of inventory, minus its estimated cost of completion and any estimated cost to complete its sale. Thus, it is the net amount realized from the sale of inventory. Net realizable value does not necessarily equal fair value.

Net realizable value is one of the valuations used in the lower of cost or market rule, which is designed to keep an business from overstating the value of its inventory.

Related Courses

Accounting for Inventory 
How to Audit Inventory