If the net realizable value of an item is lower than its cost, however, then the item's balance-sheet value must be "written down" to NRV. This is called writing down to the lower of cost or market.

The percentage of sales basis uses a percentage of your uncollectable sales to determine the accounts receivable cash realizable value. To calculate the uncollectable amount, multiply your net ...

The lower of cost or market (LCM) method is a way to record the value of inventory that places an emphasis on not overstating the value of the assets.