Net realizable value is the estimated selling price of an asset minus the expected costs to complete, dispose of, or sell it.
Net realizable value, often abbreviated NRV, is the amount a company expects to realize from an asset after subtracting the costs needed to complete, dispose of, or sell it.
In inventory accounting, NRV is used to test whether inventory is carried above an amount that can still be recovered. In receivables, the same idea appears when the reported amount should reflect what is expected to be collected.
NRV is a core conservatism check. It prevents a business from leaving assets on the books at amounts that are no longer economically recoverable.
That is why NRV is closely tied to rules such as the Lower of Cost and Net Realizable Value Rule and older formulations such as Lower of Cost or Market.
If NRV falls below recorded cost, the inventory carrying amount may need to be reduced through an inventory write-off or other valuation adjustment.
NRV is a conservative measure. It asks what is realistically left after the unavoidable costs of sale. That makes it useful in periods of weak pricing, higher shipping costs, or changing demand where book values can drift above realizable amounts.