Net Realisable Value Explained for SA Online Sellers
August 14, 2026 · 17 min read · Dylan Klichowicz
You've got the stock, the courier invoice has landed, and your product photos still look good, but something feels off. A few jars, mugs, or winter jackets aren't moving, customers are hesitating at checkout, and the money you thought was sitting on your shelf doesn't feel as solid anymore. That's the exact moment net realisable value becomes useful, because it helps you ask one plain question, in rands, what is this stock really worth today?
For a first-time South African seller, that question matters more than the accounting jargon around it. If you're importing stock, paying local courier fees, handling returns, and selling through more than one channel, the number on your purchase invoice can lie to you. Net realisable value keeps the story honest, because it measures what you can expect to pocket after the true costs of getting the item sold. It's a simple discipline, but it protects your margins when stock slows down, gets damaged, or needs a markdown.
Table of Contents
- The Day You Discover Your Stock Is Worth Less Than You Paid
- What Net Realisable Value Actually Means
- The NRV Formula Step by Step
- Two Worked Examples for SA Ecommerce Sellers
- Lower of Cost and NRV and What Goes on Your Books
- Running an NRV Check Inside Your Shopstar Store
- Simple NRV Checklist and Spreadsheet Template
- Putting It Together and What to Do Next
The Day You Discover Your Stock Is Worth Less Than You Paid
Lindi makes candles in Johannesburg and runs a small online store. In December, she ordered 400 imported glass jars for a festive collection, expecting them to fly out before the holidays. By February, half the stock is still sitting in her garage, two boxes arrived chipped, and her courier fees went up enough that some customers started dropping off at checkout.
That's the awkward moment many first-time sellers hit. The jars still look nice on the shelf, but the value you can recover from them is no longer the same as the cost you paid. That gap is where net realisable value steps in, because it tells you whether the remaining stock should stay on the books at cost, be discounted, bundled, or written down.
Why the panic feels so personal
Small ecommerce sellers often think inventory value is fixed until they sell it. It isn't. Under IAS 2 style reporting used in South Africa, inventory is measured at the lower of cost and net realisable value, and NRV means the estimated selling price in the ordinary course of business minus the costs to complete and sell, as set out in IFRS-based guidance and echoed in UK HMRC wording on the same concept. IFRS Community's NRV explainer uses the same core definition, and that conservative rule matters whenever your stock stops behaving the way you hoped.
For Lindi, the question is no longer “What did I pay?” It's “What can I realistically get back after packaging, courier costs, and the hassle of moving the last few boxes?” If the answer is lower than her recorded cost, the excess doesn't sit there forever looking healthy on paper. It gets recognised as a write-down so the books reflect the actual situation.
Practical rule: if stock has started gathering dust, stop valuing it by hope. Value it by the cash you can still recover.
The emotional part is real. But once you separate sentiment from recoverable value, the decision gets clearer. You can mark it down, bundle it with faster-moving items, or stop buying the same line again.
What Net Realisable Value Actually Means
At its simplest, net realisable value is the cash you expect to keep after you sell something and pay the remaining costs connected to that sale. It's not the sticker price. It's not the amount you'd love to get. It's the practical number that survives after the last packaging sleeve, courier label, payment fee, and marketplace commission have all taken their turn.
For a Shopstar-style seller, that matters because online selling has layers. You might have a product listed at a pretty price, but your true recovery is smaller once you factor in the route to the customer. That's why NRV is useful as a working decision tool, not just a year-end accounting term.
The three parts of the idea
The official formula is simple. NRV = estimated selling price minus costs to complete minus costs to sell. In IFRS terms, the selling price is what you expect to receive in the normal course of business, the completion costs are the extra costs still needed to make the item ready, and the selling costs are the costs that get the product out the door and into the buyer's hands. The same core wording appears in UK HMRC guidance on inventory valuation, which aligns with the IFRS approach used in South African reporting.
In plain English:
- Estimated selling price, what you realistically expect to charge through your normal channel.
- Costs to complete, the finishing costs still needed before the item can be sold.
- Costs to sell, the costs tied directly to the sale, like delivery, commissions, packaging, payment fees, or returns handling.
Think of NRV as the number left after all sale-related costs have had their say.
What NRV is not, is a forced-sale fire price or a fantasy list price. It's the net amount you'd expect to pocket in normal trading. For a handmade jewellery seller, that might include polishing, gift boxing, courier fees, and payment gateway fees. For a homeware seller using marketplaces, it may also include marketplace commissions and collection-point costs.
If you want the cleanest plain-English version, use this sentence: net realisable value is what your stock is worth to you today after you've paid the remaining costs of selling it. That's the version that helps when you're staring at slow-moving stock and deciding what to do next.
A quick mental test
Ask yourself two things. Could I sell this item for the price I'm using in my calculation? And have I included every cost that still sits between the item and the customer? If either answer is shaky, your NRV number needs another look.
The NRV Formula Step by Step
The formula is short, but every input has to be honest. Estimated selling price minus costs to complete minus costs to sell equals NRV. If one input is too optimistic, the result is too high, overstating your inventory's worth.
Step 1. Set the selling price you can realistically get
Use the price you expect through your normal sales channel, not the highest price you've ever seen on a good day. If you usually sell a scarf through your Shopstar store, at a market, and sometimes on a marketplace, use the channel that reflects how that item is moving now. If customers only buy after a discount, the discounted price is the one to use.
Step 2. Add the costs still needed to finish the item
This is the part many new sellers miss. If the product still needs finishing, boxing, labelling, or gift wrapping before it can leave your hands, those costs belong in the calculation. The guidance for NRV in practice includes items like transportation, advertising, commissions, packaging, taxes, and disposal fees where they are part of getting the sale done, and South African ecommerce sellers need to think through their actual route to market, not a generic percentage.
For an imported batch, this may also mean checking whether any remaining local handling costs still sit between the item and the customer. If a box still needs branded tissue, a courier label, or extra packing to survive delivery, those costs should be counted here.
Step 3. Subtract the costs to sell
For an online store, this can include courier fees, marketplace commissions, payment gateway fees, collection-point charges, and return handling. If you're selling through a setup like Bob Go, Aramex, Pargo, or a marketplace, those costs can change the actual value of the inventory quickly. What looks profitable on the product page can shrink once those costs are loaded in.
NRV reveals itself after every sale-related cost has been deducted. If the customer pays for shipping, that does not remove your selling costs. If you absorb the shipping, NRV should include it too.
Here's the working mini-example.
- Selling price: R450
- Costs still needed to complete and sell: R70
- NRV: R380
If the recorded cost of that candle is above R380, the excess needs a write-down. The point of the formula is that it shows whether your stock is still recoverable at cost or whether it is slipping below it.
Two Worked Examples for SA Ecommerce Sellers
The easiest way to understand NRV is to watch it change when the facts change. A damaged shipment and a planned seasonal markdown can both lead to a write-down, but the reason is different, and the number you end up with should reflect that difference.
| Scenario | Selling price (R) | Cost to complete and sell (R) | NRV (R) | Recorded cost (R) | Write-down (R) |
|---|---|---|---|---|---|
| Damaged and obsolete ceramic mugs | 160 | 40 | 120 | 150 | 30 |
| Winter jackets marked down after season | 1,400 | 220 | 1,180 | 1,350 | 170 |
Damaged mugs with a design that's already old news
A seller receives a batch of ceramic mugs, but some arrive broken and the new collection already makes the old design feel stale. The remaining mugs are still usable, but the market has cooled and they'll need a heavy discount to move. If the selling price falls to R160 and the remaining costs to complete and sell are R40, the NRV is R120.
If the recorded cost is R150, the write-down is R30 per unit. That's not a punishment, it's a correction. The stock still exists, but it no longer supports the value carried on the books.
Winter jackets sold after the season
A boutique clothing store knows it will need to clear winter jackets after August. The owner expects to discount them by 30 percent, so the selling price in the calculation should reflect the post-discount reality, not the original launch price. If the seller expects to net R1,400 from the adjusted sale, and the remaining costs to complete and sell are R220, the NRV comes to R1,180.
If the recorded cost sits at R1,350, the write-down becomes R170 per unit. The important thing here is that the markdown was planned, so the NRV check should happen before the season turns into dead stock, not after.
Practical rule: damaged stock and slow stock can both lose value, but for different reasons. One is about condition, the other is about timing.
For South African ecommerce sellers, the lesson is simple. Don't wait for a product to become embarrassing before you adjust it. The earlier you recognise the drop, the easier it is to protect cash flow and make a cleaner decision about the next buying cycle.
Lower of Cost and NRV and What Goes on Your Books
In South African inventory reporting, the rule is blunt. If cost is lower, keep inventory at cost. If NRV is lower, write the stock down to NRV and recognise the loss. The UK HMRC guidance on the same accounting concept uses the same lower-of-cost-and-NRV idea, and that lines up with the IFRS approach used in South Africa. Shopstar's guide to the statement of comprehensive income is a useful companion if you want to see how a write-down affects profit presentation.
What the adjustment looks like in practice
If you paid R100 for an item and NRV is R120, you don't invent extra profit. The stock stays at R100. If you paid R100 and NRV has fallen to R80, you reduce the inventory to R80 and record a R20 loss.
That loss usually appears as an extra cost of sales line or inventory write-down in the income statement. On the balance sheet, the inventory value drops to the lower amount. The point is to stop the stock from being carried at a number you can't realistically recover.
Why small sellers still need this discipline
You don't need a giant corporate finance team to do this properly. A sole proprietor, close corporation, or growing ecommerce seller can track NRV with a spreadsheet and a basic monthly review. What matters is consistency, not complexity.
If market conditions improve later, some accounting frameworks allow a reversal of a previous write-down within limits. In a small-business setting, though, many owners recognise the loss, keep moving, and avoid overcomplicating the books. That's often the sanest choice when the stock is seasonal, slow-moving, or damaged.
A simple way to think about it is this. Cost tells you what you paid. NRV tells you what's still recoverable. The lower number is the one that belongs on your books.
Running an NRV Check Inside Your Shopstar Store
A monthly NRV routine doesn't need drama. It needs a habit. Pull your inventory list, sort by slow movers, and look hard at the SKUs that haven't shifted in a while, especially if the product has changed shape in the market, the courier quote has gone up, or returns are creeping in.
A practical monthly rhythm
Use your store's inventory view and analytics to flag items that are moving well and items that are sitting. Then ask whether any stock is damaged, whether the selling price has changed, whether the fulfilment cost has changed, and whether a product is now better sold as a bundle or clearance item. If a product is damaged, don't wait for month-end. If it's just slow, a scheduled review at quarter-end or before year-end is usually enough to catch the problem before it grows.
For a Shopstar seller, the internal inventory help page can be a useful reference when you're setting up your stock process, especially if you need a clean product list to review: Shopstar inventory management help.
Practical rule: the moment your shipping cost, payment fee, or return rate changes, your NRV assumption might need a reset too.
How to log the adjustment simply
You don't need a full accounting system to start. A spreadsheet, a notebook, or a short monthly log can capture the SKU, the old cost, the current expected selling price, the costs to sell, the NRV, and the write-down amount. If you sell the same item across a store, Instagram, and a marketplace account, keep the channel assumptions separate, because each route can change the net amount you keep.
That matters for imported stock too. A product might look fine on the shelf, but a combination of local courier fees, marketplace commission, and return handling can pull its recoverable value down faster than you expected. The stock is still there. The value has changed.
If you're not sure whether to write something down immediately, ask a simple question. If you had to clear it this week, would the money left after all sale costs still cover the cost you paid? If not, the answer is already in front of you.
Simple NRV Checklist and Spreadsheet Template
Keep the process boring. Boring is good when you're protecting stock value. Run this checklist for every SKU you're worried about, and use the same layout each month so the numbers don't drift around.
Monthly NRV checklist
- Estimate selling price. Use the normal selling price, not a forced-sale fantasy.
- Add costs to complete. Include any costs still needed to finish the product.
- Add costs to sell. Include delivery, commissions, marketing, and other direct sale costs.
- Compare cost and NRV. Pick the lower value for your books.
A simple spreadsheet layout
You can paste this into Google Sheets or Excel and build from there:
| Item | Selling Price | Costs to Complete | Costs to Sell | NRV | Cost | Lower of Cost/NRV |
|---|---|---|---|---|---|---|
| SKU 1 | ||||||
| SKU 2 | ||||||
| SKU 3 |
If you want to make the sheet more useful, add a note column for the reason behind the number. Was it damaged stock, a seasonal markdown, a courier fee increase, or slower demand? That note helps when you revisit the item next month and wonder why the value changed.
For product structure and naming, it also helps to keep your stock list tidy. If you're still setting up product codes, the guide to what a SKU number is is a handy companion. Clean SKUs make NRV checks faster, and faster checks are more likely to happen before the damage spreads.
Putting It Together and What to Do Next
Net realisable value is just a practical question dressed up in accounting language. What can you really recover from this stock today, after the remaining sale costs are deducted? For a South African maker or DTC brand, that question protects margin, keeps inventory honest, and stops hopeful pricing from leaking into your books.
Run the check monthly, especially when suppliers, couriers, or buyer behaviour change. Talk to your bookkeeper or accountant about how to record any write-down properly, then use the result to shape your next buying and pricing decisions. The smartest sellers don't just count stock, they keep asking what that stock is worth now.
If you're building your store and want the rest of the selling stack to feel as neat as your stock records, Shopstar gives South African makers a simple place to manage products, orders, inventory, and shipping in one dashboard. It's a practical fit for sellers who want to keep an eye on margin, spot slow stock early, and make better pricing decisions without wrestling with a corporate system.
