When the lower of cost and net realizable value (LC&NRV)rule requires an inventory adjustment:

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When the LC&NRV rule requires an inventory adjustment, it usually results in a write down of the inventory value, which is reported as a selling expense or as part of cost of goods sold. While the adjustment may reduce the book value of inventory, this is not always the case. Sales allowances are typically used to record price reductions or discounts offered to customers, and are not related to inventory adjustments under the LC&NRV rule.

When the Lower of Cost and Net Realizable Value (LC&NRV)rule