Net Realizable Value (NRV) is a valuation method used in accounting to estimate the value of an asset, such as inventory or accounts receivable, by considering the total amount of money the asset might bring in when sold, minus any additional costs expected to incur during the sale of the asset. NRV is used in both Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) . It is a conservative approach to accounting, meaning that the accountant uses valuation methods that avoid overstating asset worth.

NRV is commonly used for inventory, accounts receivable, fixed assets, and in cost accounting. It is calculated by subtracting the estimated selling costs from the fair market value of the asset. For example, NRV for accounts receivable is calculated as the full receivable balance less an allowance for doubtful accounts, which is the dollar amount of invoices that the company estimates to be bad debt.

NRV has some downsides, including the fact that assumptions by management may never come to fruition, and it is a more complicated way of considering asset values. However, it has several advantages, such as telling the creditworthiness of clients and the value of certain products.

In summary, NRV is a valuation method used in accounting to estimate the value of an asset by considering the total amount of money the asset might bring in when sold, minus any additional costs expected to incur during the sale of the asset. It is a conservative approach to accounting and is used in both GAAP and IFRS.