How would you define net realisable value (or NRV) for inventory items? International Accounting Standards define net realisable value as ‘the net amount that an entity expects to realise from the sale of inventory in the ordinary course of business’. 

Essentially what’s an NRV is the selling price you’d get for the item less any expenses made for the sale to happen. The selling price should be the amount for which knowledgeable parties are expected to be willing to make the trade. It is to say that neither of the parties is desperate to make the trade and they know of the condition of the item in question in fair. Only then can the selling price be considered as reliable.

Conditions that impact an assets net realisable value are those which damage its physical condition, those that make the asset hard to sell (i.e. demand has decreased) or the selling prices have dropped significantly. Obviously there may be specific other conditions that essentially impact the price you’d be able to get rid of the asset. Once this price drops below cost value of the item, you’ve got yourself a problem and should account for a provision for obsolete inventory.