Month End Glossary

Realizable Value

Realizable value refers to the estimated value that an asset or item would fetch when sold or liquidated in the current market, net of any costs associated with its sale.

Realizable value represents the expected monetary amount that can be obtained from selling or liquidating an asset in the present market. This value is usually calculated by determining the gross value of the asset and then subtracting associated costs such as fees or commissions involved in the transfer of ownership or sale process. For example, if an asset is valued at $10,000 but requires a $500 commission fee to sell, then its realizable value would be $9,500. Companies often use realizable value in accounting to determine the recoverable amount when estimating the value of inventories, accounts receivable, or other assets on the balance sheet. For instance, while preparing the financial statements, a business may adjust the book value of its inventories to the lower of cost or net realizable value. Similarly, accounts receivable may be assessed to ensure they reflect the amount expected to be collected, adjusted for doubtful debts.

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