How must inventory be valued?

How must inventory be valued?

• A. At the lower of cost or NRV
• B. At NRV only
• C. At cost only
• D. At fair value

Answer: (B)

Inventories are measured at the lower of cost and net realisable value (NRV). NRV is the estimated selling price in the ordinary course of business minus the costs to complete the item and to dispose of it. You compare the cost (including purchase price and the costs to bring the inventory to its present condition and location) with NRV, and if NRV is lower, you write the inventory down to NRV and recognise a loss. If NRV later increases, you may reverse the write-down up to the original cost. Fair value is not used as the measurement basis for inventories under IFRS.

Inventories are measured at the lower of cost and net realisable value (NRV). NRV is the estimated selling price in the ordinary course of business minus the costs to complete the item and to dispose of it. You compare the cost (including purchase price and the costs to bring the inventory to its present condition and location) with NRV, and if NRV is lower, you write the inventory down to NRV and recognise a loss. If NRV later increases, you may reverse the write-down up to the original cost. Fair value is not used as the measurement basis for inventories under IFRS.