Browse Accounting

Inventory Valuation and Write-Offs

Inventory valuation and write-off rules used to measure stock at cost, market, or net realizable value.

Inventory Valuation and Write-Offs covers inventory valuation and write-off rules used to measure stock at cost, market, or net realizable value.

Use these pages when inventory accounting changes gross margin, working capital, taxable income, obsolescence risk, or cash-conversion analysis. It sits inside Inventory Valuation, Write-Offs, and Work in Progress, so readers can move up when the broader accounting context matters.

Use the table below to choose the narrower accounting branch before applying a term to a statement line, model input, audit trail, tax schedule, covenant test, or management report.

What This Branch Covers

AreaUse it for
Inventory AccountingInventory accounting records, values, and tracks stock movements so purchases, production, cost of goods sold, and ending inventory reconcile.
Inventory ValuationInventory valuation determines the cost assigned to inventory and cost of goods sold for financial reporting and analysis.
Inventory Write-OffAn inventory write-off is the accounting reduction of inventory when goods are damaged, obsolete, lost, or otherwise no longer recoverable at their recorded amount.
Lower of Cost and Net Realizable Value RuleThe lower of cost and net realizable value rule requires inventory to be reported at the lower of its recorded cost or its net realizable value.
Lower of Cost or MarketInventory valuation rule that limits recorded inventory to the lower of cost or an applicable market measure.

What to Check

  • Inventory class, cost flow assumption, unit cost, production stage, WIP balance, lower-of-cost-or-market test, and write-down trigger.
  • Purchase record, production report, count sheet, costing system, COGS reconciliation, and note disclosure.
  • Effect on gross profit, working capital, cash conversion, taxes, obsolescence, and valuation multiples.
  • Whether the issue is raw materials, WIP, finished goods, consignment, spare parts, or inventory reserves.
  • Comparability across FIFO, LIFO, weighted average, standard cost, and reporting periods.

Common Mistakes

  • Treating inventory value as guaranteed sale value.
  • Ignoring obsolete, slow-moving, consigned, or written-down inventory.
  • Comparing gross margins without checking cost-flow assumptions.
  • Mixing production cost, period cost, and inventory reserve concepts.

Inventory-accounting content is educational and does not provide accounting, tax, audit, legal, inventory-management, investment, or valuation advice.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.

Inventory Accounting

Inventory accounting records, values, and tracks stock movements so purchases, production, cost of goods sold, and ending inventory reconcile.

Inventory Valuation

Inventory valuation determines the cost assigned to inventory and cost of goods sold for financial reporting and analysis.

Inventory Write-Off

An inventory write-off is the accounting reduction of inventory when goods are damaged, obsolete, lost, or otherwise no longer recoverable at their recorded amount.

Lower of Cost and NRV Rule

The lower of cost and net realizable value rule requires inventory to be reported at the lower of its recorded cost or its net realizable value.

Lower of Cost or Market

Inventory valuation rule that limits recorded inventory to the lower of cost or an applicable market measure.

Revised on Sunday, June 21, 2026
Inventory Period Flows and Work in Progress