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Inventory is to be valued at cost or net realisable value. A scenario where goods are imported for resale and the cost of importation ie price and import duty tend to make the cost price too high – to the extent that goods are not selling fast ie above import price.
Management then decide to sell goods at a price cheaper than the import price just to clear them from warehouse.At what price can such goods be valued given that some inventory are still on hand at the end of the accounting period?
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The goods must be valued at NRV since this is lower than cost.
NRV is the Sales value less the selling costs. NRV may involve a little estimation.
in the above scenario, assuming they are going to sell the remainder of the goods at the new reduced price, NRV would be the current selling price, less any costs of selling.
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