What Is NRV in Accounting?

by Amanda McMullen, Demand Media

In accounting, NRV is an acronym that stands for "net realizable value." An asset's net realizable value is the amount of money a business expects to receive when it sells or collects on the asset. Most businesses use net realizable value calculations to estimate the worth of their current inventory or accounts receivable.

Net Realizable Value for Inventory

When a business purchases an inventory item, it records the cost it paid for the item on its balance sheet as the item's historical cost. Inventory items depreciate over time and may not be worth their original price in the future. To account for this change, businesses also calculate and record each inventory item's net realizable value. To determine the net realizable value of an inventory item, the business estimates the item's realistic selling price and subtracts any associated selling expenses.

Net Realizable Value for Accounts Receivable

Accounts receivable are the accounts of customers or debtors who owe money to the company. A business typically considers its accounts receivable to be assets, because they represent money that the company will eventually receive. Because the company may not receive all of the money in accounts receivable due to bad debts, it estimates the worth of accounts receivable by computing their net realizable value. To calculate net realizable value for accounts receivable, a business subtracts the value of uncollectible accounts from the total value of accounts receivable.

Determining Uncollectible Accounts

To determine the net realizable value of accounts receivable, businesses must first determine which accounts are uncollectible. Most businesses accomplish this by multiplying the total value of their accounts receivable by an estimation of the percentage of accounts that will be uncollectible. This estimation is based on the average percentage of delinquent accounts present during previous accounting periods.


Businesses typically list the net realizable value of their inventory and accounts receivable on their balance sheets. High net realizable values raise the value of a company's total assets, which it uses to attract potential investors. An individual or entity considering the purchase of the company may also view the company's balance sheet and assets to determine the company's value.

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