NRV Testing
Test the core inventory valuation rule: inventory must be carried at the lower of cost and NRV.
- Ledger + 2 client documents
- Key analysis in Inventory
What it checks
- NRV = estimated selling price − costs to complete − costs to sell.
- Compared item by item, or across similar items where IAS 2 permits — same line, similar end use, same market, not practicably separable.
- Raw materials and WIP are written down only where the finished good will not sell at or above cost.
- A write-down and a slow-moving provision on one item take the higher, not the sum.
How the result is read
NRV is not selling price less a selling-cost percentage: for anything unfinished the cost to complete comes out too, and that is where the exposure sits. The raw-materials rule runs opposite to intuition — falling material prices trigger nothing if the finished product still sells above cost. Post-year-end prices are better evidence only where they confirm a condition that already existed.
The worksheet, on the demo engagement
NRV Testing, as the application draws it for Harrow Precision Engineering Ltd, the fictional demo engagement — one row per SKU.
- SKUs tested
- 486
- Cost > NRV (violations)
- 4
- Write-down required
- (1,900)
- Provision recorded
- 0
NRV test per IAS 2.9, item by item so headroom on one line cannot absorb a shortfall on another. Write-downs are in thousands, the same scale as the statements. These four are finished goods; costs to complete would also be deducted for raw materials and WIP. Total unrecorded write-down 1,900 feeds M-06, and HW-4402 is carried here rather than in SLOB because this is the higher of the two.
Result grid6 rows
| SKU | Description | Qty | Unit cost | Last sales price | NRV / unit |
|---|---|---|---|---|---|
| HW-4401 | PCB Assembly v2.1 | 120,000 | 38.50 | 31.00 | 29.00 |
| HW-4402 | Power supply 65W | 80,000 | 22.00 | 19.50 | 18.00 |
| HW-4410 | Enclosure moulded | 200,000 | 11.20 | 11.80 | 10.50 |
| HW-4415 | Sensor module | 60,000 | 48.00 | 44.00 | 43.00 |
| SW-2200 | USB dongle — software | 500,000 | 4.50 | 5.20 | 4.90 |
| Total write-down implied |
In the application
NRV Testing is filed under Inventory, index letter E. "Run all analyses" runs it with every other analysis the ledger and the documents loaded can answer. The worksheet states the population it tested on its face — or "Not applicable" with the reason when a column it depends on is empty — and the Excel workbook the engagement exports files it under E, beside an index of the source files with their SHA-256 fingerprints.
Read it with
Run your next audit file test without the Excel crash.
One free engagement to evaluate, valid 60 days. The ledger never leaves the machine.
- 20 minutes
- Runs on a fictional engagement
- No client data required