Calculate net realizable value for inventory and accounts receivable, including LCNRV write-downs and allowance adjustments from selling price inputs.

Net Realizable Value Calculator

Basic Inventory LCNRV A/R NRV

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Net Realizable Value Formula

The following formula is used to calculate the Net Realizable Value (NRV) for inventory.

NRV = SP - C - E

Variables:

  • NRV is the Net Realizable Value ($)
  • SP is the estimated selling price (in the ordinary course of business) ($)
  • C is the costs to complete (or prepare) the inventory for sale ($)
  • E is the estimated costs necessary to make the sale (selling/handling/commissions/transport, etc.) ($)

To calculate the Net Realizable Value, subtract the costs to complete and the estimated costs necessary to make the sale from the estimated selling price.

What is a Net Realizable Value?

Net Realizable Value (NRV) is an accounting measure of how much you expect to realize from selling an asset, net of reasonably predictable costs to complete, sell, or dispose of that asset. For inventory, NRV is commonly used as a conservative constraint in valuation (for example, when applying “lower of cost or NRV”) so inventory is not carried above the amount expected to be collected from its sale.

How to Calculate Net Realizable Value?

The following steps outline how to calculate the Net Realizable Value (NRV).

  1. First, determine the estimated selling price of the inventory (SP) ($).
  2. Next, determine the costs to complete the inventory for sale (C) ($).
  3. Next, determine the estimated selling expenses (E) ($).
  4. Next, gather the formula from above = NRV = SP – C – E.
  5. Finally, calculate the Net Realizable Value (NRV).
  6. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem : 

Use the following variables as an example problem to test your knowledge.

Estimated selling price of the inventory (SP) ($) = 150

Costs to complete (C) ($) = 20

Estimated Selling Expenses (E) ($) = 10

NRV = 150 – 20 – 10 = 120