Lower of cost or net realizable value (LCNRV)
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Inventory measurement principle requiring write-down when NRV falls below cost.
Lower of cost or net realizable value (LCNRV) in plain English
This is the rule that forces a company to be realistic about what its unsold inventory is worth. "Cost" is what you originally paid for the goods; "net realizable value" (NRV) is what you could actually sell them for today, minus any costs to finish and sell them. LCNRV says: put whichever of those two numbers is LOWER on your books — never the higher one. It's basically accounting's version of not fooling yourself: if your stuff has lost value, you face it now rather than pretending it's still worth what you paid.
Also called: LCNRV
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