Livestock is cattle, hogs, horses, poultry, sheep, and small animals bred and raised by an agricultural producer. A farm may raise livestock for sale. When animals are available and held for sale, the farm accountant can value the livestock at their selling price, less any estimated costs of disposal. This net realizable value option is only available if all of the following conditions are present:
- There are reliable and realizable market prices for the animals, which are readily determinable
- Disposal costs are insignificant and predictable
- The animals are available for immediate delivery
The livestock has a market value, which is assigned to the inventory and also recorded as a change in revenue in the income statement. At the end of the reporting period, the amount of raised livestock is determined and valued based on the market price at the end of the period. This ending valuation is then compared to the valuation already in the relevant inventory account from the beginning of the reporting period; the difference is recorded in a revenue account.