If net realizable value of the inventory is lower than its cost, the total assets on the statement of financial position and net income on the statement of income will be reduced.

Question

Quizplus · Accepted Answer

When the net realizable value (NRV) of inventory is lower than its cost, an impairment loss is recognized. This reduces the carrying amount of inventory on the balance sheet (thus reducing total assets) and the loss is also reflected in the income statement, reducing net income.

If Net Realizable Value of the Inventory Is Lower Than