Accounting Rule: IFRS Inventory Valuation

CFA Level I Glossary

Under IFRS, inventory sits on the balance sheet at the lower of cost and net realizable value (NRV). NRV is the estimated selling price minus the costs still needed to finish and sell the goods. When NRV falls below cost, you write the inventory down and that loss hits earnings. A classic trap is mixing this with US GAAP inventory rules, or confusing NRV with fair value of something unrelated to inventory.

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