what is net realizable value nrv 
net realizable value nrv is a valuation method common in inventory accounting that considers the total amount of money an asset might generate upon its sale less a reasonable estimate of the costs fees and taxes associated with that sale or disposal investopedia zoe hansenunderstanding net realizable value nrv nrv is a common method used to evaluate an asset s value for inventory accounting two of the largest assets that a company may list on a balance sheet are accounts receivable and inventory nrv is used to value both of these asset types nrv is a valuation method used in both generally accepted accounting principles gaap and international financial reporting standards ifrs gaap requires that certified public accountants cpas apply the principle of conservatism to their accounting work many business transactions allow for judgment or discretion when choosing an accounting method the principle of conservatism requires accountants to choose the more conservative approach to all transactions this means that the accountant should use the accounting method that does not overstate the value of assets 1nrv is a conservative method for valuing assets because it estimates the true amount the seller would receive net of costs if the asset were to be sold formula and calculation of net realizable valuethe formula for determining net realizable value nrv is the expected selling price is calculated as the number of units produced multiplied by the unit selling price this is often reduced by product returns or other items that may reduce gross revenue it can also simply be done for just a single item rather than a group of units in regards to accounts receivable this is equal to the gross amount to be collected without considering an allowance for doubtful accounts the total production and selling costs are the expenses required to facilitate the trade when using nrv calculations for cost accounting these expenses are the separable costs that can be identified or allocated to each good alternatively this expense may be the anticipated write off amount for receivables or expenses incurred to collect this debt 