Calculate inventory write-down amounts when net realizable value drops below book value. Determine the impact on COGS and financial statements.
An inventory write-down is required when the net realizable value (NRV) of inventory falls below its book (carrying) value. Under both US GAAP (ASC 330) and IFRS (IAS 2), companies must report inventory at the lower of cost or net realizable value, recognizing any shortfall as a loss.
Write-downs commonly occur due to price erosion, damage, obsolescence, or changes in customer demand. The write-down amount equals the difference between book value and NRV multiplied by the number of units affected.
This calculator helps you determine the total write-down amount for a given inventory item or lot. Enter the book value per unit, the estimated NRV per unit, and the number of units to see the total adjustment and its impact on the income statement.
Supply-chain managers, warehouse operators, and shipping coordinators rely on precise inventory write-down data to maintain efficiency and control costs across complex distribution networks. Revisit this calculator whenever conditions change to keep your logistics plans aligned with real-world performance.
Failing to write down impaired inventory overstates assets and profits. This calculator ensures you recognize the correct loss amount, supporting compliance with accounting standards and giving management accurate data for pricing, purchasing, and disposal decisions. Real-time recalculation lets you model different scenarios quickly, ensuring your logistics decisions are backed by accurate, up-to-date numbers.
Write-Down per Unit = Book Value − NRV (if Book Value > NRV, otherwise 0) Total Write-Down = Write-Down per Unit × Units Affected New Carrying Value = NRV × Units
Result: Total Write-Down = $3,500
Write-down per unit = $25 − $18 = $7. Total = $7 × 500 = $3,500. The inventory carrying value is reduced from $12,500 to $9,000, and $3,500 is charged to COGS or a loss account.
US GAAP (ASC 330) uses the "lower of cost or market" rule with a floor and ceiling. IFRS (IAS 2) uses the simpler "lower of cost or NRV" test. Both require write-down when carrying value exceeds recoverable value, but differ on reversibility.
A write-down reduces both the balance sheet (lower inventory asset) and the income statement (higher COGS or loss). This can affect debt covenants, tax liability, and management bonuses tied to profitability metrics. Transparent disclosure is essential.
Proactive inventory management — demand forecasting, regular ABC analysis, and slow-mover identification — reduces the frequency and magnitude of write-downs. Companies that track aging and turnover by SKU catch NRV issues early before they become material.
A write-down is triggered when the NRV of inventory drops below its book value. Common causes include price declines, product obsolescence, damage, changes in technology, and reduced market demand.
NRV is the estimated selling price in the ordinary course of business minus the estimated costs of completion, marketing, and distribution. It represents the actual cash you expect to receive.
Write-downs are typically recorded as an increase in COGS or as a separate inventory loss line item on the income statement. The balance sheet inventory value is reduced by the same amount.
Under IFRS (IAS 2), write-downs can be reversed if NRV subsequently increases, up to the original cost. Under US GAAP (ASC 330), once written down, the new lower cost becomes the permanent cost basis — no reversal is allowed.
NRV should be reassessed at each reporting date (quarterly for public companies, at least annually for private companies). More frequent assessment is appropriate for volatile or perishable inventory.
No. A write-down reduces the carrying value to NRV — the inventory still has some value. A write-off reduces the value to zero, typically when inventory is unsalvageable, expired, or destroyed.