AAT Level 4 Drafting and Interpreting Financial Statements Practice Test

Net realisable value is the estimated selling price in the ordinary course of business, minus the estimated costs of completion and the estimated costs necessary to make the sale. This amount represents what the entity expects to realise from the inventory, not the present value of future cash flows.

The present value of future cash flows from sale is a concept used in impairment testing under IAS 36 (recoverable amount), where you compare the higher of value in use (PV of future cash flows) and fair value less costs of disposal. It is not part of the NRV calculation in IAS 2. So NRV does not involve discounting future cash flows.