AAT Level 4 External Auditing Practice Test 2026 – Complete Exam Prep

Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling. To test NRV, you want evidence about the actual selling price you can realise for inventory. Post year‑end sales invoices provide real, observed selling prices and tie back to the inventory records, so you can compare these prices to the cost of the inventory. If the realised selling price is at least equal to or higher than cost, NRV supports no write-down; if it's lower, an impairment may be required. This is why post year‑end invoices tied to the final inventory sheets are the most direct evidence for testing NRV.

Replacement cost and current market price are not NRV calculations (they relate to different concepts in inventory valuation), and discounted cash flow estimates are not the standard NRV measure for inventory.